Preproposal statement of inquiry was filed as WSR 98-06-066.

Title of Rule:

Chapter 388-96 WAC

NURSING ((HOME ACCOUNTING AND REIMBURSEMENT)) FACILITY MEDICAID PAYMENT SYSTEM

AMENDATORY SECTION (Amending WSR 97-17-040, filed 8/14/97, effective 9/14/97)

WAC 388-96-010  ((Terms.)) Definitions. Unless the context indicates otherwise, the following definitions apply in this chapter.

"Accounting" means activities providing information, usually quantitative and often expressed in monetary units, for:

(1) Decision-making;

(2) Planning;

(3) Evaluating performance;

(4) Controlling resources and operations; and

(5) External financial reporting to investors, creditors, regulatory authorities, and the public.

(("Accrual method of accounting" means a method of accounting in which revenues are reported in the period when earned, regardless of when collected, and expenses are reported in the period in which incurred, regardless of when paid.))

"Administration and management" means activities used to maintain, control, and evaluate the efforts and resources of an organization for the accomplishment of the objectives and policies of that organization.

"Allowable costs" - ((See WAC 388-96-501)) means documented costs that are necessary, ordinary, and related to the care of Medicaid recipients, and are not expressly declared nonallowable by this chapter or chapter 74.46 RCW. Costs are ordinary if they are of the nature and magnitude that prudent and cost conscious management would pay.

(("Ancillary care" means services that are required by the individual, comprehensive plan of care provided by qualified therapists or by support personnel under their supervision.

"Arm's-length transaction" means a transaction resulting from good-faith bargaining between a buyer and seller who have adverse bargaining positions in the marketplace. The following are not arms's-length transactions:

(1) The sale or exchange of nursing home facilities between two or more parties in which all parties subsequently continue to own one or more of the facilities involved in the transaction; and

(2) Sale of a nursing home facility that is subsequently leased back to the seller within five years of the date of sale.

"Assets" means economic resources and certain deferred charges of the contractor, recognized and measured according to generally accepted accounting principles.

"Bad debts" means amounts considered to be uncollectible from accounts and notes receivable.

"Beds" means, unless otherwise specified, the number of set-up beds in the nursing home, not to exceed the number of licensed beds.

"Beneficial owner" means any person who:

(1) Directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares:

(a) Voting power which includes the power to vote, or to direct the voting of such ownership interest; and/or

(b) Investment power which includes the power to dispose, or to direct the disposition of such ownership interest;

(2) Directly or indirectly, creates or uses a trust, proxy, power of attorney, pooling arrangement, or any other contract, arrangement, or device with the purpose or effect of divesting himself or herself of beneficial ownership of an ownership interest, or preventing the vesting of such beneficial ownership as part of a plan or scheme to evade the reporting requirements of this chapter;

(3) Subject to subsection (2) of "beneficial owner," has the right to acquire beneficial ownership of such ownership interest within sixty days, including but not limited to any right to acquire:

(a) Through the exercise of any option, warrant, or right;

(b) Through the conversion of an ownership interest;

(c) Pursuant to the power to revoke a trust, discretionary account, or similar arrangement; or

(d) Pursuant to the automatic termination of a trust, discretionary account, or similar arrangement;

Except that, any person who acquires an ownership interest or power specified in (a), (b), or (c) of subsection (3) of "beneficial owner" with the purpose or effect of changing or influencing the control of the contractor, or in connection with or as a participant in any transaction having such purpose or effect, immediately upon such acquisition shall be deemed to be the beneficial owner of the ownership interest which may be acquired through the exercise or conversion of such ownership interest or power; or

(4) In the ordinary course of business, is a pledgee of ownership interest under a written pledge agreement, shall not be deemed the beneficial owner of such pledged ownership interest until the pledgee:

(a) Takes all formal steps necessary required to declare a default; and

(b) Determines the power to vote or to direct the vote or to dispose or to direct the disposition of such pledged ownership interest will be exercised; provided that, the pledge agreement:

(i) Is bona fide and was not entered into with the purpose nor with the effect of changing or influencing the control of the contractor, nor in connection with any transaction having such purpose or effect, including persons meeting the conditions set forth in subsection (2) of this definition; and

(ii) Prior to default, does not grant the pledgee the power to:

(A) Vote or direct the vote of the pledged ownership interest; or

(B) Dispose or direct the disposition of the pledged ownership interest, other than the grant of such power or powers pursuant to a pledge agreement under which credit is extended and in which the pledgee is a broker or dealer.

"Capitalization" means the recording of an expenditure as an asset.)) "Allowable depreciation costs" means depreciation costs of tangible assets, whether owned or leased by the contractor, meeting the criteria specified in RCW 74.46.330.

"Anticipated patient days" are calculated by multiplying the number of licensed beds at the nursing facility by the number of days in the cost report period used to set the property rate and multiplying the product by the nursing facility's expected occupancy, which must be at eighty-five percent or above.

"Assignment of contract" means:

(1) A new nursing facility licensee has elected to care for Medicaid residents;

(2) The department finds no good cause to object to continuing the Medicaid contract at the facility; and

(3) The new licensee accepts assignment of the immediately preceding contractor's contract at the facility.

"Capitalized lease" means a lease required to be recorded as an asset and associated liability in accordance with generally accepted accounting principles.

"Cash method of accounting" means a method of accounting in which revenues are recorded when cash is received, and expenditures for expense and asset items are not recorded until cash is disbursed for those expenditures and assets.

"Change of ownership" means a substitution of the individual operator or operating entity contracting with the department to deliver care services to medical care recipients in a nursing facility and ultimately responsible for the daily operational decisions of the nursing facility.

(1) Events which constitute a change of ownership include, but are not limited to, the following:

(a) Changing the form of legal organization of the contractor ((is changed ()), e.g., a sole proprietor forms a partnership or corporation(()));

(b) Transferring ownership of the nursing ((home)) facility business enterprise ((is transferred by the contractor)) to another party, regardless of whether ownership of some or all of the real property and/or personal property assets of the facility ((is)) are also transferred;

(c) ((If the contractor is)) Dissolving of a partnership((, any event that dissolves the partnership));

(d) ((If the contractor is a corporation, and)) Dissolving the corporation ((is dissolved, merges)), merging the corporation with another corporation, which is the survivor, or ((consolidates)) consolidating with one or more other corporations to form a new corporation;

(e) ((If the operator is a corporation and)) Transferring, whether by a single transaction or multiple transactions within any continuous twenty-four-month period, fifty percent or more of the stock ((is transferred)) to one or more:

(i) New or former stockholders; or

(ii) Present stockholders each having held less than five percent of the stock before the initial transaction; or

(f) Substituting of the individual operator or the operating entity by any other event or combination of events ((which results in a substitution or substitution of control of the individual operator or the operating entity contracting with the department to deliver care services)).

(2) Ownership does not change when the following((, without more,)) occurs:

(a) A party contracts with the contractor to manage the nursing facility enterprise as the contractor's agent, i.e., subject to the contractor's general approval of daily operating and management decisions; or

(b) The real property or personal property assets of the nursing facility change ownership or are leased, or a lease of them is terminated, without a substitution of individual operator or operating entity and without a substitution of control of the operating entity contracting with the department to deliver care services.

"Charity allowance" means a reduction in charges made by the contractor because of the indigence or medical indigence of a patient.

"Contract" means ((a contract)) an agreement between the department and a contractor for the delivery of nursing facility services to medical care recipients.

(("Contractor" means an entity that contracts with the department to deliver services to medical care recipients in a nursing facility. The entity is responsible for operational decisions.))

"Cost report" means all schedules of a nursing facility's cost report submitted according to the department's instructions.

"Courtesy allowances" means reductions in charges in the form of an allowance to physicians, clergy, and others, for services received from the contractor. Employee fringe benefits are not considered courtesy allowances.

(("CSO" means the local community services office of the department.

"Department" means the department of social and health services (DSHS) and employees.

"Depreciation" means the systematic distribution of the cost or other base of tangible assets, less salvage, over the estimated useful life of the assets.))

"Donated asset" means an asset the contractor acquired without making any payment for the asset either in cash, property, or services. An asset is not a donated asset if the contractor:

(1) Made even a nominal payment in acquiring the asset; or

(2) Used donated funds to purchase the asset.

(("Entity" means an individual, partnership, corporation, or any other association of individuals capable of entering enforceable contracts.))

"Equity capital" means total tangible and other assets which are necessary, ordinary, and related to patient care from the most recent provider cost report minus related total long-term debt from the most recent provider cost report plus working capital as defined in this section.

(("Exceptional care recipient" means a medical care recipient determined by the department to require exceptionally heavy care.

"Facility" means a nursing home or facility licensed in accordance with chapter 18.51 RCW, or that portion of a hospital licensed in accordance with chapter 70.41 RCW which operates as a nursing home.

"Fair market value" means:

(1) Prior to January 1, 1985, the price for which an asset would have been purchased on the date of acquisition in an arm's-length transaction between a well-informed buyer and seller, neither being under any compulsion to buy or sell; or

(2) Beginning January 1, 1985, the replacement cost of an asset, less observed physical depreciation, on the date the fair market value is determined.

"Financial statements" means statements prepared and presented according to generally accepted accounting principles and the provisions of chapter 74.46 RCW and this chapter including, but not limited to:

(1) Balance sheet;

(2) Statement of operations;

(3) Statement of changes in financial position; and

(4) Related notes.))

"Fiscal year" means the operating or business year of a contractor. All contractors report on the basis of a twelve-month fiscal year, but provision is made in this chapter for reports covering abbreviated fiscal periods. As determined by context or otherwise, "fiscal year" may also refer to a state fiscal year extending from July 1 through June 30 of the following year and comprising the first or second half of a state fiscal biennium.

"Gain on sale" means the actual total sales price of all tangible and intangible nursing ((home)) facility assets including, but not limited to, land, building, equipment, supplies, goodwill, and beds authorized by certificate of need, minus the net book value of such assets immediately prior to the time of sale.

(("Generally accepted accounting principles (GAAP)" means accounting principles approved by the financial accounting standards Board (FASB).

"Generally accepted auditing standards (GAAS)" means auditing standards approved by the American institute of certified public accountants (AICPA).

"Goodwill" means the excess of the price paid for:

(1) A business over the fair market value of all other identifiable, tangible, and intangible assets acquired; and

(2) An asset over the fair market value of the asset.

"Historical cost" means the actual cost incurred in acquiring and preparing an asset for use, including feasibility studies, architects' fees, and engineering studies.

"Imprest fund" means a fund which is regularly replenished in exactly the amount expended from it.))

"Intangible asset" is an asset that lacks physical substance but possesses economic value.

"Interest" means the cost incurred for the use of borrowed funds, generally paid at fixed intervals by the user.

(("Joint facility costs" means any costs representing expenses incurred which benefit more than one facility, or one facility and any other entity.

"Lease agreement" means a contract between two parties for the possession and use of real or personal property or assets for a specified period of time in exchange for specified periodic payments. Elimination or addition of any party to the contract, expiration, or modification of any lease term in effect on January 1, 1980, or termination of the lease by either party by any means shall constitute a termination of the lease agreement. An extension or renewal of a lease agreement, whether or not pursuant to a renewal provision in the lease agreement, shall be considered a new lease agreement. A strictly formal change in the lease agreement which modifies the method, frequency, or manner in which the lease payments are made, but does not increase the total lease payment obligation of the lessee shall not be considered modification of a lease term.

"Medical care program" means medical assistance provided under RCW 74.09.500 or authorized state medical care services.

"Medical care recipient" means an individual determined eligible by the department for the services provided in chapter 74.09 RCW.))

"Multiservice facility" means a facility at which two or more types of health or related care are delivered, e.g., a hospital and nursing facility, or a boarding home and nursing facility.

(("Net book value" means the historical cost of an asset less accumulated depreciation.

"Net invested funds" means the net book value of tangible fixed assets, excluding assets associated with central or home offices or otherwise not on the nursing facility premises, employed by a contractor to provide services under the medical care program, including land, buildings, and equipment as recognized and measured in conformity with generally accepted accounting principles and not in excess of any lids or reimbursement limits set forth in this chapter, plus an allowance for working capital as provided in this chapter.))

"Nonadministrative wages and benefits" means wages, benefits, and corresponding payroll taxes paid for nonadministrative personnel, not to include administrator, assistant administrator, or administrator-in-training.

"Nonallowable costs" means the same as "unallowable costs."

"Nonrestricted funds" means funds which are not restricted to a specific use by the donor, e.g., general operating funds.

(("Nursing facility" means a home, place, or institution, licensed under chapter 18.51 or 70.41 RCW, where nursing care services are delivered.

"Operating lease" means a lease under which rental or lease expenses are included in current expenses in accordance with generally accepted accounting principles.

"Owner" means a sole proprietor, general or limited partner, or beneficial interest holder of five percent or more of a corporation's outstanding stock.

"Ownership interest" means all interests beneficially owned by a person, calculated in the aggregate, regardless of the form the beneficial ownership takes.

"Patient day" or "resident day" means a calendar day of care provided to a nursing facility resident that will include the day of admission and exclude the day of discharge; except that, when admission and discharge occur on the same day, one day of care shall be deemed to exist. A patient is admitted for purposes of this definition when the patient is assigned a bed and a patient medical record is opened. A "client day" or "recipient day" means a calendar day of care provided to a medical care recipient determined eligible by the department for services provided under chapter 74.09 RCW, subject to the same conditions regarding admission and discharge applicable to a patient day or resident day of care.))

"Per diem (per patient day or per resident day) costs" means total allowable costs for a fiscal period divided by total patient or resident days for the same period.

(("Professionally designated real estate appraiser" means an individual:

(1) Regularly engaged in the business of providing real estate valuation services for a fee;

(2) Qualified by a nationally recognized real estate appraisal educational organization on the basis of extensive practical appraisal experience, including:

(a) Writing of real estate valuation reports;

(b) Passing of written examinations on valuation practice and theory; and

(c) Subscribing and adhering to the standards of professional practice required by the organization.))

"Prospective daily payment rate" means the rate assigned by the department to a contractor for providing service to medical care recipients((. The rate is used to compute the maximum participation of the department in the contractor's costs)) prior to the application of settlement principles.

(("Qualified therapist":

(1) An activities specialist having specialized education, training, or at least one year's experience in organizing and conducting structured or group activities;

(2) An audiologist eligible for a certificate of clinical competence in audiology or having the equivalent education and clinical experience;

(3) A mental health professional as defined by chapter 71.05 RCW;

(4) A mental retardation professional who is either a qualified therapist or a therapist approved by the department who has specialized training or one year's experience in treating or working with the mentally retarded or developmentally disabled;

(5) A social worker graduated from a school of social work;

(6) A speech pathologist eligible for a certificate of clinical competence in speech pathology or having the equivalent education and clinical experience;

(7) A physical therapist as defined by chapter 18.74 RCW;

(8) An occupational therapist licensed under chapter 18.59 RCW and chapter 246-847 WAC; or

(9) A respiratory care practitioner certified under chapter 18.89 RCW.

"Rebased rate" or "cost rebased rate" means a facility-specific rate assigned to a nursing facility for a particular rate period established on desk-reviewed, adjusted costs reported for that facility covering at least six months of a prior calendar year.))

"Recipient" means a ((medical care)) Medicaid recipient.

(("Records" means data supporting all financial statements and cost reports including, but not limited to:

(1) All general and subsidiary ledgers;

(2) Books of original entry;

(3) Invoices;

(4) Schedules;

(5) Summaries; and

(6) Transaction documentation, however maintained.

"Regression analysis" means a statistical technique through which one can analyze the relationship between a dependent or criterion variable and a set of independent or predictor variables.))

"Related care" includes:

(1) The director of nursing services;

(2) Activities and social services programs;

(3) Medical and medical records specialists; and

(4) Consultation provided by:

(a) Medical directors; and

(b) Pharmacists((;

(c) Occupational therapists;

(d) Physical therapists;

(e) Speech therapists;

(f) Other therapists; and

(g) Mental health professionals as defined in law and regulation.

"Related organization" means an entity under common ownership and/or control, or which has control of or is controlled by, the contractor. Common ownership exists if an entity has a five percent or greater beneficial ownership interest in the contractor and any other entity. Control exists if an entity has the power, directly or indirectly, to significantly influence or direct the actions or policies of an organization or institution, whether or not the power is legally enforceable and however exercisable or exercised)).

"Relative" includes:

(1) Spouse;

(2) Natural parent, child, or sibling;

(3) Adopted child or adoptive parent;

(4) Stepparent, stepchild, stepbrother, stepsister;

(5) Father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law;

(6) Grandparent or grandchild; and

(7) Uncle, aunt, nephew, niece, or cousin.

(("Restricted fund" means a fund for which the use of the principal and/or income is restricted by agreement with or direction of the donor to a specific purpose, in contrast to a fund over which the contractor has complete control. Restricted funds generally fall into three categories:

(1) Funds restricted by the donor to specific operating purposes;

(2) Funds restricted by the donor for additions to property, plant, and equipment; and

(3) Endowment funds.

"Secretary" means the secretary of the department of social and health services (DSHS).))

"Start-up costs" means the one-time preopening costs incurred from the time preparation begins on a newly constructed or purchased building until the first patient is admitted. Start-up costs include:

(1) Administrative and nursing salaries;

(2) Utility costs;

(3) Taxes;

(4) Insurance;

(5) Repairs and maintenance; and

(6) Training costs.

Start-up costs do not include expenditures for capital assets.

(("Title XIX" means the 1965 amendments to the Social Security Act, P.L. 89-07, as amended.))

"Unallowable costs" means costs which do not meet every test of an allowable cost.

"Uniform chart of accounts" means a list of account titles identified by code numbers established by the department for contractors to use in reporting costs.

"Vendor number" means a number assigned to each contractor delivering care services to medical care recipients.

"Working capital" means total current assets necessary, ordinary, and related to patient care from the most recent cost report minus total current liabilities necessary, ordinary, and related to patient care from the most recent cost report.

[Statutory Authority: RCW 74.46.800. 97-17-040, § 388-96-010, filed 8/14/97, effective 9/14/97. Statutory Authority: RCW 74.46.800 and 1995 1st sp.s. c 18. 95-19-037 (Order 3896), § 388-96-010, filed 9/12/95, effective 10/13/95. Statutory Authority: RCW 74.46.800. 94-12-043 (Order 3737), § 388-96-010, filed 5/26/94, effective 6/26/94. Statutory Authority: RCW 74.46.800 and 74.09.120. 93-19-074 (Order 3634), § 388-96-010, filed 9/14/93, effective 10/15/93. Statutory Authority: RCW 74.09.120. 91-22-025 (Order 3270), § 388-96-010, filed 10/29/91, effective 11/29/91. Statutory Authority: RCW 79.09.120 [74.09.120] and 74.46.800. 90-09-061 (Order 2970), § 388-96-010, filed 4/17/90, effective 5/18/90. Statutory Authority: 1987 c 476. 88-01-126 (Order 2573), § 388-96-010, filed 12/23/87. Statutory Authority: RCW 74.09.120 and 74.46.800. 85-13-060 (Order 2240), § 388-96-010, filed 6/18/85. Statutory Authority: RCW 74.09.120. 84-24-050 (Order 2172), § 388-96-010, filed 12/4/84. Statutory Authority: RCW 74.46.800. 84-12-039 (Order 2105), § 388-96-010, filed 5/30/84. Statutory Authority: RCW 74.09.120. 83-19-047 (Order 2025), § 388-96-010, filed 9/16/83; 82-21-025 (Order 1892), § 388-96-010, filed 10/13/82; 81-22-081 (Order 1712), § 388-96-010, filed 11/4/81. Statutory Authority: RCW 74.09.120 and 74.46.800. 81-06-024 (Order 1613), § 388-96-010, filed 2/25/81. Statutory Authority: RCW 74.09.120. 80-09-083 (Order 1527), § 388-96-010, filed 7/22/80; 79-04-061 (Order 1381), § 388-96-010, filed 3/28/79. Statutory Authority: RCW 74.08.090 and 74.09.120. 78-06-080 (Order 1300), § 388-96-010, filed 6/1/78; Order 1262, § 388-96-010, filed 12/30/77.]

AMENDATORY SECTION (Amending Order 2245, filed 6/18/85)

WAC 388-96-020  Prospective cost-related ((reimbursement)) payment. The ((prospective cost-related reimbursement)) nursing facility Medicaid payment system is the system used by the department to pay for ((skilled)) nursing facility services ((and intermediate care facility services)) provided to medical care recipients. ((Reimbursement rates for such services will)) Payment for nursing facility care shall be determined in accordance with ((the principles, methods, and standards contained in)) this chapter and ((in)) chapter 74.46 RCW ((as set forth in this chapter)) as amended by E2SHB 2935 (chapter 322, Laws of 1998). The provisions of chapter 74.46 RCW are incorporated by reference in this chapter as if fully set forth.

[Statutory Authority: RCW 74.09.120 and 74.46.800. 85-13-065 (Order 2245), § 388-96-020, filed 6/18/85. Statutory Authority: RCW 74.09.120. 83-19-047 (Order 2025), § 388-96-020, filed 9/16/83; 82-21-025 (Order 1892), § 388-96-020, filed 10/13/82. Statutory Authority: RCW 74.08.090 and 74.09.120. 78-06-080 (Order 1300), § 388-96-020, filed 6/1/78; Order 1262, § 388-96-020, filed 12/30/77.]

AMENDATORY SECTION (Amending Order 3555, filed 5/26/93, effective 6/26/93)

WAC 388-96-026  ((Projected budget for)) New contractors. (1) For purposes of administering ((chapter 388-96 WAC)) the payment system, the department shall consider a "new contractor" as one who receives a new vendor number and:

(a) Builds from the ground-up a new facility; and operates the new facility with completely new staff, administration and residents. If the "new contractor" operated a nursing facility immediately before the opening of the new facility, then the "new contractor" must operate the new facility with:

(i) ((With)) Staff and administration that are substantially to completely different than the previous operation of the "new contractor"; and

(ii) ((Have)) A resident population that is substantially to completely different than the residents residing in the previous nursing facility; or

(b) Currently operates, acquires, or assumes responsibility for operating an existing nursing facility that was not operated under a Medicaid contract immediately prior to the effective date of the new Medicaid contract; or

(c) Purchases or leases a nursing facility that, at the time of the purchase or lease, was operated under a Medicaid contract.

(2) ((A new contractor as defined under WAC 388-96-026 (1)(a) or (b) shall submit a projected budget to the department at least sixty days before its contract becomes effective. The projected budget shall:

(a) Cover the twelve months immediately following the date the contractor enters the program;

(b) Be certified by the new contractor;

(c) Be prepared on forms and in accordance with instructions provided by the department; and

(d) Include all earnest money, purchase, and lease agreements involved in the transactions, if applicable.

(3))) A new contractor shall submit((,)):

(a) At least sixty days before the effective date of the contract or assignment, a statement disclosing the identity of individuals or organizations who:

(((a))) (i) Have a beneficial ownership interest in the current operating entity or the land, building, or equipment of the facility; or

(((b))) (ii) Have a beneficial ownership interest in the purchasing or leasing entity.

(b) By March 31st of the following year, a cost report for the period from the effective date of the contract or assignment through December 31st of year the contract or assignment was effective.

[Statutory Authority: RCW 74.46.800, 74.46.450 and 74.09.120. 93-12-051 (Order 3555), § 388-96-026, filed 5/26/93, effective 6/26/93. Statutory Authority: RCW 74.46.800. 92-16-013 (Order 3424), § 388-96-026, filed 7/23/92, effective 8/23/92. Statutory Authority: RCW 74.09.180 and 74.46.800. 89-01-095 (Order 2742), § 388-96-026, filed 12/21/88. Statutory Authority: RCW 74.09.120. 83-19-047 (Order 2025), § 388-96-026, filed 9/16/83; Order 1262, § 388-96-026, filed 12/30/77.]

AMENDATORY SECTION (Amending Order 3896, filed 9/12/95, effective 10/13/95)

WAC 388-96-108  Failure to submit final reports. (1) If a nursing facility's contract is terminated or assigned, ((the old contractor shall submit a final report as required by WAC 388-96-032(1) and 388-96-104(2). Such final reports must be received by the department within one hundred twenty days after the contract is terminated or prior to the expiration of any department-approved extension granted pursuant to WAC 388-96-107. If)) and the nursing facility does not submit a final cost report ((is not submitted)) as required by RCW 74.46.040, the nursing facility shall return to the department all payments made to the terminating or assigning contractor relating to the period for which a report has not been received ((shall be returned to the department)) within sixty days after ((receiving)) the terminating or assigning contractor receives a written demand from the department.

(2) Effective sixty days after the terminating or assigning contractor receives a written demand for payment ((is received by the contractor)), interest will begin to accrue payable to the department on any unpaid balance at the rate of one percent per month.

[Statutory Authority: RCW 74.46.800 and 1995 1st sp.s. c 18. 95-19-037 (Order 3896), § 388-96-108, filed 9/12/95, effective 10/13/95. Statutory Authority: RCW 74.09.120. 83-19-047 (Order 2025), § 388-96-108, filed 9/16/83. Statutory Authority: RCW 74.08.090. 82-21-025 (Order 1892), § 388-96-108, filed 10/13/82.]

AMENDATORY SECTION (Amending Order 1262, filed 12/30/77)

WAC 388-96-119  Reports--False information. (1) If a contractor knowingly or with reason to know files a report containing false information, such action constitutes good cause for termination of its contract with the department.

(2) In accordance with chapter 74.46 RCW, as amended by section 31 of E2SHB 2935 (chapter 322, Laws of 1998), the department will make adjustments to ((reimbursement)) payment rates ((required)) because a false report was filed ((will be made in accordance with WAC 388-96-769)).

(3) Contractors filing false reports may be referred for prosecution under applicable statutes.

[Order 1262, § 388-96-119, filed 12/30/77.]

AMENDATORY SECTION (Amending Order 2372, filed 5/7/86, effective 7/1/86)

WAC 388-96-122  Amendments to reports. (1) For the purpose of determining ((audited)) allowable costs ((in computing a final settlement)), the department shall consider an amendment to an annual report ((shall be considered)) only if filed by the provider ((prior to)) before the receipt by the provider of the notification scheduling the department's ((field)) audit((, except that)). The contractor may file an amendment ((may be filed)) subsequent to such notification and pursuant to the provisions of ((WAC 388-96-769 solely for the purpose of adjusting reimbursement rates. In order to determine the date of receipt, all notifications scheduling field audits shall be sent by registered mail, return receipt requested)) chapter 74.46 RCW, as amended by section 31 of E2SHB 2935 (chapter 322, Laws of 1998) to adjust a payment rate allocation because of an error or omission. ((Amendments may be filed by)) When the provider ((and considered by the department)) files an amendment, the department shall consider it only if significant errors or omissions are discovered ((which are significant)). The department shall deem errors or omissions ((shall be deemed)) "significant" ((if)) when the errors or omissions would mean a net difference of two cents or more per patient day or one thousand dollars or more in reported costs, whichever is higher, in any ((cost area)) component rate allocation. To file an amendment, only those cost report pages where changes appear need to be filed, together with the certification required by WAC 388-96-117.

(2) If an amendment is filed, a contractor shall also submit with the amendment an account of the circumstances relating to and the reasons for the amendment, along with supporting documentation. The department shall refuse to consider an amendment resulting in a more favorable settlement or payment rate allocation to a contractor if the amendment is not the result of circumstances beyond the control of the contractor or the result of good-faith error under the system of cost allocation and accounting in effect during the reporting period in question.

(3) Acceptance or use by the department of an amendment to a cost report shall in no way be construed as a release of applicable civil or criminal liability.

[Statutory Authority: RCW 74.46.800. 86-10-055 (Order 2372), § 388-96-122, filed 5/7/86, effective 7/1/86; 84-12-039 (Order 2105), § 388-96-122, filed 5/30/84. Statutory Authority: RCW 74.09.120. 82-11-065 (Order 1808), § 388-96-122, filed 5/14/82; 79-03-021 (Order 1370), § 388-96-122, filed 2/21/79; Order 1262, § 388-96-122, filed 12/30/77.]

NEW SECTION

WAC 388-96-202  Scope of audit or department audit. (1) The department shall review the contractor's recordkeeping and accounting practices and, where appropriate, make written recommendations for improvements.

(2) The department's audit shall result in a schedule of summarizing adjustments to the contractor's cost report. The schedule shall show whether such adjustments eliminate costs reported or include costs not reported. Each adjustment listed shall include an explanation for the adjustment, the cost report account, and the dollar amount. In accordance with chapter 74.46 RCW, the department shall comply with the purpose of department audits by verifying that:

(a) Supporting records are in agreement with reported data;

(b) Only those assets, liabilities, and revenue and expense items the department has specified as allowable have been included by the contractor in computing the costs of services provided under its contract;

(c) Allowable costs have been accurately determined and are necessary, ordinary, and related to resident care;

(d) Related organizations and beneficial ownerships or interests have been correctly disclosed;

(e) Home office or central office costs have been reported and allocated in accordance with the provisions of this chapter and chapter 74.46 RCW;

(f) Recipient trust funds have been properly maintained;

(g) Facility receivables do not include benefits or payments to which the provider is not entitled; and

(h) The contractor is otherwise in compliance with the provisions of this chapter and chapter 74.46 RCW.

(3) In complying with the purpose of department audits in chapter 74.46 RCW, the department may select any or all schedules of a facility's cost report. The department shall audit cost reports, resident trust fund accounts, and facility receivables of each nursing facility participating in the Medicaid payment system as determined necessary by the department.

(4) When determining the contractor's final settlement, the department shall apply to reported costs adjustments written under subsection (2), whether used for the purpose of establishing component rate allocations as described in chapter 74.46 RCW or to ascertain contractor compliance with subsection (2).

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NEW SECTION

WAC 388-96-218  Proposed, preliminary, and final settlements. (1) For each component rate, the department shall calculate a settlement at the lower of prospective payment rate or audited allowable costs, except as otherwise provided in this chapter.

(2) In the proposed settlement report, a contractor shall compare the contractor's payment rates during a report period, weighted by the number of resident days reported for the period when each rate was in effect, to the contractor's allowable costs for the reporting period. The contractor shall take into account all authorized shifting, retained savings, and upper limits to rates on a cost center basis.

(a) Within one hundred twenty days after a proposed settlement report is received, the department shall:

(i) Review the proposed settlement report for accuracy; and

(ii) Either accept or reject the proposal of the contractor. If accepted, the proposed settlement report shall become the preliminary settlement report. If rejected, the department shall issue, by cost center, a preliminary settlement report fully substantiating disallowed costs, refunds, or underpayments due and adjustments to the proposed preliminary settlement.

(b) A contractor shall have twenty-eight days after receipt of a preliminary settlement report to contest such report under WAC 388-96-901 and 388-96-904. Upon expiration of the twenty-eight-day period, the department shall not review or adjust a preliminary settlement report. Any administrative review of a preliminary settlement shall be limited to calculation of the settlement, to the application of settlement principles and rules, or both, and shall not encompass rate or audit issues.

(3) The department shall issue a final settlement report to the contractor after the completion of the department audit process, including exhaustion or termination of any administrative review and appeal of audit findings or determinations requested by the contractor, but not including judicial review as may be available to and commenced by the contractor.

(a) The department shall prepare a final settlement by cost center and shall fully substantiate disallowed costs, refunds, underpayments, or adjustments to the cost report and financial statements, reports, and schedules submitted by the contractor. The department shall take into account all authorized shifting, savings, and upper limits to rates on a cost center basis. For the final settlement report, the department shall compare:

(i) The payment rate the contractor was paid for the facility in question during the report period, weighted by the number of allowable resident days reported for the period each rate was in effect to the contractor's;

(ii) Audited allowable costs for the reporting period; or

(iii) Reported costs for the nonaudited reporting period.

(b) A contractor shall have twenty-eight days after the receipt of a final settlement report to contest such report pursuant to WAC 388-96-901 and 388-96-904. Upon expiration of the twenty-eight-day period, the department shall not review a final settlement report. Any administrative review of a final settlement shall be limited to calculation of the settlement, the application of settlement principles and rules, or both, and shall not encompass rate or audit issues.

(c) The department shall reopen a final settlement if it is necessary to make adjustments based upon findings resulting from a department audit performed pursuant to chapter 74.46 RCW as amended by section 8 of E2SHB 2935, (chapter 322, Laws of 1998). The department may also reopen a final settlement to recover an industrial insurance dividend or premium discount under RCW 51.16.035.

(4) In computing a preliminary or final settlement, a contractor may shift savings and/or overpayment in the support services cost center to cover a deficit and/or underpayment in the direct care or therapy cost centers up to the amount of the savings as provided in chapter 74.46 RCW as amended by section 10 of E2SHB 2935, (chapter 322, Laws of 1998). A contractor may not shift rate payments into any cost center, for settlement or any other purpose, if the total rate payment in that cost center, after shifting, would exceed the contractor's peer group median cost plus percentage limit for that cost center previously used by the department in establishing that facility's rate in that cost center following the period being settled. The provider's payment rate is subject to the provisions of RCW 74.46.421.

(5) If an administrative or judicial remedy sought by the facility is not granted or is granted only in part after exhaustion or mutual termination of all appeals, the facility shall refund all amounts due the department within sixty days after the date of decision or termination plus interest as payment on judgments from the date the review was requested pursuant to WAC 388-96-901 and WAC 388-96-904 to the date the repayment is made.

(6) In determining whether a facility has forfeited unused rate funds in its direct care, therapy care and support services component rates under authority of RCW 74.46._____(3), the following rules shall apply:

(a) Federal or state survey officials shall determine when a facility is not in substantial compliance or is providing substandard care, according to federal and state nursing facility survey regulations;

(b) The federal or state survey officials shall determine if a facility was out of substantial compliance, or was providing substandard quality of care, for more than ninety days by counting the total number of days of noncompliance or substandard quality of care during the settlement period at issue, regardless of the length of the settlement period;

(c) Correspondence from state or federal survey officials notifying a facility of its compliance status shall be used to determine the beginning and ending dates of any period(s) of noncompliance; and

(d) Forfeiture shall occur if the facility was out of substantial compliance more than ninety days during the settlement period. The ninety-day period need not be continuous if the number of days of noncompliance exceed ninety days during the settlement period. Also, forfeiture shall occur if the nursing facility was determined to provide substandard quality of care during the settlement period.

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AMENDATORY SECTION (Amending Order 2573, filed 12/23/87)

WAC 388-96-502  Indirect and overhead costs. ((If)) Subject to the provisions of this chapter and chapter 74.46 RCW, when a contractor provides goods or services that are not reimbursable ((under this chapter)), any indirect or overhead costs associated with their provision must be allocated to such goods or services on a reasonable basis approved by the department and must not be reported as allowable costs. ((Such goods and services include, but are not limited to, compensation to administrative personnel and management fees in excess of limits established in this chapter.))

[Statutory Authority: 1987 c 476. 88-01-126 (Order 2573), § 388-96-502, filed 12/23/87. Statutory Authority: RCW 74.46.800. 86-10-055 (Order 2372), § 388-96-502, filed 5/7/86, effective 7/1/86; 84-12-039 (Order 2105), § 388-96-502, filed 5/30/84.]

AMENDATORY SECTION (Amending WSR 97-17-040, filed 8/14/97, effective 9/14/97)

WAC 388-96-505  Offset of miscellaneous revenues. (1) The contractor shall reduce allowable costs whenever the item, service, or activity covered by such costs generates revenue or financial benefits (e.g., purchase discounts, refunds of allowable costs or rebates) other than through the contractor's normal billing for care services; except, the department shall not deduct from the allowable costs of a nonprofit facility unrestricted grants, gifts, and endowments, and interest therefrom.

(2) The contractor shall reduce allowable costs for hold-bed revenue in the support services, operations and property((, administrative, and operational cost areas)) rate components only. In the ((property cost area)) support services rate component, the amount of reduction ((will)) shall be determined by dividing a facility's allowable ((property)) housekeeping costs by total adjusted patient days and multiplying the result by total hold-room days. In the ((administrative cost area)) operations rate component, the amount of the ((bed hold revenue shall)) reduction shall be determined by dividing a facility's allowable ((administrative)) operation costs by total adjusted patient days and multiplying the result by total hold-room days. In the ((operational cost area)) property rate component, the amount of reduction ((will)) shall be determined by dividing allowable ((operational)) property costs ((minus dietary and laundry costs)) by the total adjusted patient days and multiplying the result by total hold-room days.

(3) Where goods or services are sold, the amount of the reduction shall be the actual cost relating to the item, service, or activity. In the absence of adequate documentation of cost, it shall be the full amount of the revenue received. Where financial benefits such as purchase discounts, refunds of allowable costs or rebates are received, the amount of the reduction shall be the amount of the discount or rebate. Financial benefits such as purchase discounts, refunds of allowable costs and rebates, including industrial insurance rebates, shall be offset against allowable costs in the year the contractor actually receives the benefits.

(4) Only allowable costs shall be recovered under this section. Costs allocable to activities or services not included in nursing facility services ((()), e.g., costs of vending machines and services specified in chapter 388-86 WAC not included in nursing facility services(())), are nonallowable costs.

[Statutory Authority: RCW 74.46.200 and 74.46.800. 97-17-040, § 388-96-505, filed 8/14/97, effective 9/14/97. Statutory Authority: RCW 74.46.800 and 74.09.120. 93-19-074 (Order 3634), § 388-96-505, filed 9/14/93, effective 10/15/93. Statutory Authority: RCW 74.46.800. 92-16-013 (Order 3424), § 388-96-505, filed 7/23/92, effective 8/23/92. Statutory Authority: 1987 c 476. 88-01-126 (Order 2573), § 388-96-505, filed 12/23/87. Statutory Authority: RCW 74.09.120. 84-24-050 (Order 2172), § 388-96-505, filed 12/4/84; 82-21-025 (Order 1892), § 388-96-505, filed 10/13/82. Statutory Authority: RCW 74.09.120 and 74.46.800. 81-06-024 (Order 1613), § 388-96-505, filed 2/25/81. Statutory Authority: RCW 74.08.090 and 74.09.120. 78-06-080 (Order 1300), § 388-96-505, filed 6/1/78; Order 1262, § 388-96-505, filed 12/30/77.]

AMENDATORY SECTION (Amending Order 3737, filed 5/26/94, effective 6/26/94)

WAC 388-96-525  Education and training. (1) Necessary and ordinary expenses of on-the-job training and in-service training required for employee orientation and certification training directly related to the performance of duties assigned will be allowable costs. Cost of training for which the nursing facility is reimbursed outside the payment rate is an unallowable cost.

(2) ((Ordinary expenses of nursing assistant training conducted pursuant to chapter 18.52A RCW will be allowable costs.

(3))) Necessary and ordinary expenses of recreational and social activity training conducted by the contractor for volunteers will be allowable costs. Expenses of training programs for other nonemployees will not be allowable costs.

(((4))) (3) Expenses for travel, lodging, and meals associated with education and training in the states of Idaho, Oregon, and Washington and the province of British Columbia are allowable if the expenses meet the requirements of this chapter.

(((5))) (4) Except travel, lodging, and meal expenses, education and training expenses at sites outside of the states of Idaho, Oregon, and Washington and the province of British Columbia are allowable costs if the expenses meet the requirements of this chapter.

(((6))) (5) Costs designated by this section as allowable shall be subject to any applicable cost center limit established by this chapter.

[Statutory Authority: RCW 74.46.800. 94-12-043 (Order 3737), § 388-96-525, filed 5/26/94, effective 6/26/94. Statutory Authority: RCW 74.46.800 and 74.09.120. 93-19-074 (Order 3634), § 388-96-525, filed 9/14/93, effective 10/15/93. Statutory Authority: RCW 74.46.800. 84-12-039 (Order 2105), § 388-96-525, filed 5/30/84. Statutory Authority: RCW 74.09.120. 81-22-081 (Order 1712), § 388-96-525, filed 11/4/81. Statutory Authority: RCW 74.09.120 and 74.46.800. 81-06-024 (Order 1613), § 388-96-525, filed 2/25/81. Statutory Authority: RCW 74.09.120. 80-06-122 (Order 1510), § 388-96-525, filed 5/30/80, effective 7/1/80; Order 1262, § 388-96-525, filed 12/30/77.]

NEW SECTION

WAC 388-96-530  What will be allowable compensation for owners, relatives, licensed administrator, assistant administrator, and/or administrator in training? Subject to any applicable cost center limit established by chapter 74.46 RCW, total allowable compensation shall be:

(1) As provided in the employment contract, including benefits, whether such contract is written, verbal, or inferred from the acts of the parties; or

(2) In the absence of a contract, gross salary or wages excluding payroll taxes and benefits made available to all employees, e.g., health insurance.

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NEW SECTION

WAC 388-96-532  Does the contractor have to maintain time records? (1) The contractor shall maintain time records that are adequate for audit for owners, relatives, the licensed administrator, assistant administrator, and/or administrator-in-training. The contractor shall include in such records verification of the actual hours of service performed for the nursing home and shall document compensated time was spent in provision of necessary services actually performed.

(2) If the contractor has no or inadequate time records, the cost of compensation shall be unallowable.

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AMENDATORY SECTION (Amending Order 3634, filed 9/14/93, effective 10/15/93)

WAC 388-96-535  Management agreements, management fees, and central office services. (1) ((If a contractor intends to enter into a management agreement with an individual or firm managing the nursing home as an agent of the contractor, the contractor shall send a copy of the agreement to the department at least sixty days before the agreement is to become effective. A contractor shall send a copy of any amendment to a management agreement to the department at least thirty days in advance of the date the amendment is to become effective. The department shall not allow management fees for periods prior to the time the department receives a copy of the applicable agreement. When necessary for the health and safety of medical care recipients, the department may waive the sixty-day notice requirement in writing.

(2) The department shall allow management fees only if:

(a) A written management agreement both:

(i) Creates a principal and/or agent relationship between the contractor and the manager; and

(ii) Sets forth the items, services, and activities to be provided by the manager.

(b) Documentation demonstrates the services contracted for were actually delivered, were nonduplicative of other services rendered to the facility directly or indirectly, and the services were necessary to care for the residents of the facility. Fees are allowable only for such necessary, nonduplicative services to the extent they are of the nature and magnitude that prudent and cost-conscious management would pay.

(3))) The contractor shall disclose to the department the nature and purpose of the management agreement, including an organizational chart showing the relationship between the contractor, management company and all related organizations. The department may request additional information or clarification.

(2) Acceptance of a management agreement may not be construed as a determination that all management fees or costs are allowable in whole or in part. Management fees or costs not disclosed or approved in conformity with chapter 74.46 RCW and this section are unallowable. When necessary for the health and safety of medical care recipients, the department may waive the sixty-day or thirty-day advance notice requirement of RCW 74.46.280 in writing.

(3) Management fees are allowable only for necessary, nonduplicative services that they are of the nature and magnitude that prudent and cost-conscious management would pay. Costs applicable to services, facilities, supplies and employees furnished by the management company are subject to RCW 74.46.220.

(4) Allowable fees for all general management services of any kind referenced in this section, including corporate or business entity management and ((board of director's fees and including)) management fees not allocated to specific services, are subject to any applicable cost center limit established ((by this chapter)) in chapter 74.46 RCW.

(((4) A management fee paid to or for the benefit of a related organization shall be allowable at the lower of the actual cost to the related organization of providing necessary services related to patient care under the agreement, or the cost of comparable services purchased elsewhere. Where costs to the related organization represent joint facility costs, the department shall comply with WAC 388-96-534 in measuring such costs.))

(5) Central office costs, owner's compensation, and other fees or compensation, including joint facility costs, for general administrative and management services, including ((the)) management expense not allocated to specific services, shall be subject to any cost center limit established ((by this chapter)) by chapter 74.46 RCW.

(6) Necessary travel and housing expenses of nonresident staff working at a contractor's nursing facility shall be considered allowable costs if the visit does not exceed three weeks.

(7) Bonuses paid to employees at a contractor's nursing facility or management company shall be considered compensation.

(((8) As similarly provided in WAC 388-96-210 regarding field audits, the department shall commence to apply a facility's peer group median cost plus percentage limit in the administrative cost area, in place of management fee limits previously contained in this section, beginning with report year 1992.))

[Statutory Authority: RCW 74.46.800 and 74.09.120. 93-19-074 (Order 3634), § 388-96-535, filed 9/14/93, effective 10/15/93. Statutory Authority: 1987 c 476. 88-01-126 (Order 2573), § 388-96-535, filed 12/23/87. Statutory Authority: RCW 74.46.800. 86-10-055 (Order 2372), § 388-96-535, filed 5/7/86, effective 7/1/86. Statutory Authority: RCW 74.09.120. 83-19-047 (Order 2025), § 388-96-535, filed 9/16/83; 81-22-081 (Order 1712), § 388-96-535, filed 11/4/81. Statutory Authority: RCW 74.09.120 and 74.46.800. 81-06-024 (Order 1613), § 388-96-535, filed 2/25/81. Statutory Authority: RCW 74.09.120. 80-09-083 (Order 1527), § 388-96-535, filed 7/22/80; 79-03-020 (Order 1371), § 388-96-535, filed 2/21/79; Order 1262, § 388-96-535, filed 12/30/77.]

NEW SECTION

WAC 388-96-536  Does the department limit the allowable compensation for an owner or relative of an owner? (1) The department shall limit total compensation of an owner or relative of an owner to ordinary compensation for necessary services actually performed.

(a) Compensation is ordinary if it is the amount usually paid for comparable services in a comparable facility to an unrelated employee, and does not exceed any applicable limit set out in chapter 74.46 RCW.

(b) A service is necessary if it is related to patient care and would have had to be performed by another person if the owner or relative had not done it.

(2) If the service provided would require licensed staff, e.g., RN, then the same license standard must be met when performed by an owner, relative or other administrative personnel.

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NEW SECTION

WAC 388-96-540  Will the department allow the cost of an administrator-in-training? (1) The department shall not allow costs of an administrator-in-training for the purpose of setting the operations component prospective payment rate allocation.

(2) The department shall pay the costs of an approved administrator-in-training program by an add-on to the current prospective payment rate; unless, the operations cost center is at or above the median cost limit for the facility's peer group reduced or increased under chapter 74.46 RCW.

(3) To obtain a rate add-on, the contractor shall submit a request for an add-on to its current prospective rate together with necessary documentation which shall include:

(a) A copy of the department of licensing approval of the administrator-in-training program, and

(b) A schedule indicating the commencement date, expected termination date, salary or wage, hours, and costs of benefits. The contractor shall notify the department, at least thirty days in advance, of the actual termination date of the administrator-in-training program. Upon termination of the program, the department shall reduce the current prospective rate by an amount corresponding to the rate add-on.

(4) If the contractor does not use the administrator-in-training funds for the purpose for which they were granted, the department shall immediately recoup the misspent or unused funds.

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NEW SECTION

WAC 388-96-542  Home office or central office. (1) The department shall audit the home office or central office whenever a nursing facility receiving such services is audited.

(2)(a) Assets used in the provision of services by or to a nursing facility, but not located on the premises of the nursing facility, shall not be included in net invested funds or in the calculation of property payment for the nursing facility.

(b) The nursing facility may allocate depreciation, interest expense, and operating lease expense for the home office, central office, and other off-premises assets to the cost of the services provided to or by the nursing facility on a reasonable statistical basis approved by the department.

(c) The allocated costs of (b) of this subsection may be included in the cost of services in such cost centers where such services and related costs are appropriately reported.

(3) Home office or central office costs must be allocated and reported in conformity with the department-approved JCAD methodology as required by WAC 388-96-534.

(4) Home office or central office costs are subject to the limitation specified in RCW 74.46.410.

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AMENDATORY SECTION (Amending Order 3634, filed 9/14/93, effective 10/15/93)

WAC 388-96-580  Operating leases of office equipment. (1) Rental costs of office equipment under arm's-length operating leases shall be allowable to the extent such costs are necessary, ordinary, and related to patient care. ((Beginning January 1, 1985, office))

(2) The department shall pay office equipment rental costs ((shall be reimbursed)) in the ((administration and)) operations ((cost center)) component rate allocation. Office equipment may include items typically used in administrative or clerical functions such as telephones, copy machines, desks and chairs, calculators and adding machines, file cabinets, typewriters, and computers. ((However, expenses of leasing computers may not be reimbursed in excess of ten cents per patient day. Effective with July 1, 1993 rate setting, office equipment rental costs shall be reimbursed in the administrative cost center))

(3) The department shall not pay for depreciation of leased office equipment.

[Statutory Authority: RCW 74.46.800 and 74.09.120. 93-19-074 (Order 3634), § 388-96-580, filed 9/14/93, effective 10/15/93. Statutory Authority: RCW 74.09.120, 74.46.840 and 74.46.800. 85-17-052 (Order 2270), § 388-96-580, filed 8/19/85. Statutory Authority: RCW 74.09.120. 84-24-050 (Order 2172), § 388-96-580, filed 12/4/84. Statutory Authority: RCW 74.46.800. 84-12-039 (Order 2105), § 388-96-580, filed 5/30/84.]

AMENDATORY SECTION (Amending WSR 97-17-040, filed 8/14/97, effective 9/14/97)

WAC 388-96-585  Unallowable costs. (1) The department shall not allow costs if not documented, necessary, ordinary, and related to the provision of care services to authorized patients. Unallowable costs listed in subsection (2) of this section represent a partial summary of such costs, in addition to those unallowable under chapter 74.46 RCW and this chapter.

(2) The department shall include, but not limit, unallowable costs to the following:

(a) ((Costs of items or services not covered by the medical care program. Costs of nonprogram items or services even if indirectly reimbursed by the department as the result of an authorized reduction in patient contribution;

(b) Costs of services and items covered by the Medicaid program but not included in the Medicaid nursing facility daily payment rate. Items and services covered by the Medicaid nursing facility daily payment rate are listed in chapters 388-86 and 388-97 WAC;

(c) Costs associated with a capital expenditure subject to Section 1122 approval (Part 100, Title 42 C.F.R.) if the department found the capital expenditure inconsistent with applicable standards, criteria, or plans. If the contractor did not give the department timely notice of a proposed capital expenditure, all associated costs shall be nonallowable as of the date the costs are determined not to be reimbursable under applicable federal regulations;

(d) Costs associated with a construction or acquisition project requiring certificate of need approval or exemption from the requirements for certificate of need for the replacement of existing nursing home beds pursuant to RCW 70.38.115 (13)(a) if such approval or exemption was not obtained;

(e) Costs of outside activities (e.g., costs allocable to the use of a vehicle for personal purposes or related to the part of a facility leased out for office space);

(f) Salaries or other compensation of owners, officers, directors, stockholders, and others associated with the contractor or home office, except compensation paid for service related to patient care;

(g))) Costs in excess of limits or violating principles set forth in this chapter;

(((h))) (b) Costs resulting from transactions or the application of accounting methods circumventing ((the)) principles ((of the prospective cost-related reimbursement system)) set forth in this chapter;

(((i) Costs applicable to services, facilities, and supplies furnished by a related organization in excess of the lower of the cost to the related organization or the price of comparable services, facilities, or supplies purchased elsewhere;

(j))) (c) Bad debts. Beginning July 1, 1983, the department shall allow bad debts of Title XIX recipients only if:

(i) The debt is related to covered services;

(ii) It arises from the recipient's required contribution toward the cost of care;

(iii) The provider can establish reasonable collection efforts were made;

(iv) The debt was actually uncollectible when claimed as worthless; and

(v) Sound business judgment established there was no likelihood of recovery at any time in the future.

Reasonable collection efforts shall consist of at least three documented attempts by the contractor to obtain payment((. Such documentation shall demonstrate)) demonstrating that the effort devoted to ((collect)) collecting the bad debts of Title XIX recipients is ((at)) the same ((level as the effort normally)) devoted by the contractor to collect the bad debts of non-Title XIX ((patients. Should a contractor collect on a bad debt, in whole or in part, after filing a cost report, reimbursement for the debt by the department shall be refunded to the department to the extent of recovery. The department shall compensate a contractor for bad debts of Title XIX recipients at final settlement through the final settlement process only.

(k) Charity and courtesy allowances;

(l) Cash, assessments, or other contributions, excluding dues, to charitable organizations, professional organizations, trade associations, or political parties, and costs incurred to improve community or public relations. Any portion of trade association dues attributable to legal and consultant fees and costs in connection with lawsuits or other legal action against the department shall be unallowable;

(m) Vending machine expenses;

(n) Expenses for barber or beautician services not included in routine care;

(o) Funeral and burial expenses;

(p) Costs of gift shop operations and inventory;

(q) Personal items such as cosmetics, smoking materials, newspapers and magazines, and clothing, except items used in patient activity programs where clothing is a part of routine care;

(r) Fund-raising expenses, except expenses directly related to the patient activity program;

(s) Penalties and fines;

(t) Expenses related to telephones, televisions, radios, and similar appliances in patients' private accommodations;

(u) Federal, state, and other income taxes;

(v) Costs of special care services except where authorized by the department;

(w) Expenses of any employee benefit not in fact made available to all employees on an equal or fair basis, e.g., key-man insurance, other insurance, or retirement plans;

(x) Expenses of profit-sharing plans;

(y) Expenses related to the purchase and/or use of private or commercial airplanes which are in excess of what a prudent contractor would expend for the ordinary and economic provision of such a transportation need related to patient care;

(z) Personal expenses and allowances of owners or relatives;

(aa) All expenses for membership in professional organizations and all expenses of maintaining professional licenses, e.g., nursing home administrator's license;

(bb) Costs related to agreements not to compete;

(cc) Goodwill and amortization of goodwill;

(dd) Expense related to vehicles which are in excess of what a prudent contractor would expend for the ordinary and economic provision of transportation needs related to patient care)) recipients;

(((ee))) (d) Legal and consultant fees in connection with a fair hearing against the department relating to those issues where:

(i) A final administrative decision is rendered in favor of the department or where otherwise the determination of the department stands at the termination of administrative review; or

(ii) In connection with a fair hearing, a final administrative decision has not been rendered; or

(iii) In connection with a fair hearing, related costs are not reported as unallowable and identified by fair hearing docket number in the period they are incurred if no final administrative decision has been rendered at the end of the report period; or

(iv) In connection with a fair hearing, related costs are not reported as allowable, identified by docket number, and prorated by the number of issues decided favorably to a contractor in the period a final administrative decision is rendered((.

(ff) Legal and consultant fees in connection with a lawsuit against the department, including suits which are appeals of administrative decisions;

(gg) Lease acquisition costs, bed rights and other intangible assets not related to patient care;

(hh) Interest charges assessed by the state of Washington for failure to make timely refund of overpayments and interest expenses incurred for loans obtained to make such refunds;

(ii) Beginning January 1, 1985, lease costs, including operating and capital leases, except for office equipment operating lease costs;

(jj) Beginning January 1, 1985, interest costs;

(kk) Travel expenses outside the states of Idaho, Oregon, and Washington, and the Province of British Columbia. However, travel to or from the home or central office of a chain organization operating a nursing home will be allowed whether inside or outside these areas if such travel is necessary, ordinary, and related to patient care;

(ll) Board of director fees for services in excess of one hundred dollars per board member, per meeting, not to exceed twelve meetings per year;

(mm) Moving expenses of employees in the absence of a demonstrated, good-faith effort to recruit within the states of Idaho, Oregon, and Washington, and the Province of British Columbia;

(nn) For rates effective after June 30, 1993, depreciation expense in excess of four thousand dollars per year for each passenger car or other vehicles primarily used for the administrator, facility staff, or central office staff;

(oo) Any costs associated with the use of temporary health care personnel from any nursing pool not registered with the director of the department of health at the time of such pool personnel use;

(pp) Costs of payroll taxes associated with compensation in excess of allowable compensation for owners, relatives, and administrative personnel;

(qq) Department-imposed postsurvey charges incurred by the facility as a result of subsequent inspections which occur beyond the first postsurvey visit during the certification survey calendar year;

(rr) For all partial or whole rate periods after July 17, 1984, costs of assets, including all depreciable assets and land, which cannot be reimbursed under the provisions of the Deficit Reduction Act of 1984 (DEFRA) and state statutes and regulations implementing DEFRA;

(ss) Effective for July 1, 1991, and all following rates, compensation paid for any purchased nursing care services, including registered nurse, licensed practical nurse, and nurse assistant services, obtained through service contract arrangement in excess of the amount of compensations which would have been paid for such hours of nursing care services had they been paid at the combined regular and overtime average hourly wage, including related taxes and benefits, for in-house nursing care staff of like classification of registered nurse, licensed practical nurse, or nursing assistant at the same nursing facility, as reported on the facility's filed cost report for the most recent cost report period;

(tt) Outside consultation expenses required pursuant to WAC 388-97-275;

(uu) Fees associated with filing a bankruptcy petition under chapters VII, XI, and XIII, pursuant to the Bankruptcy Reform Act of 1978, Public Law 95-598;

(vv) All advertising or promotional costs of any kind, except reasonable costs of classified advertising in trade journals, local newspapers, or similar publications for employment of necessary staff;

(ww) Costs reported by the contractor for a prior period to the extent such costs, due to statutory exemption, will not be incurred by the contractor in the period to be covered by the rate));

(e) All interest costs not specifically allowed in this chapter or chapter 74.46 RCW;

(f) Increased costs resulting from a series of transactions between the same parties and involving the same assets, e.g., sale and lease back, successive sales or leases of a single facility or piece of equipment.

[Statutory Authority: RCW 74.46.190, [74.46.]460 and [74.46.]800. 97-17-040, § 388-96-585, filed 8/14/97, effective 9/14/97. Statutory Authority: RCW 74.46.800. 96-15-056, § 388-96-585, filed 7/16/96, effective 8/16/96. Statutory Authority: RCW 74.46.800 and 1995 1st sp.s. c 18. 95-19-037 (Order 3896), § 388-96-585, filed 9/12/95, effective 10/13/95. Statutory Authority: RCW 74.46.800. 94-12-043 (Order 3737), § 388-96-585, filed 5/26/94, effective 6/26/94; 93-17-033 (Order 3615), § 388-96-585, filed 8/11/93, effective 9/11/93. Statutory Authority: RCW 74.46.800, 74.46.450 and 74.09.120. 93-12-051 (Order 3555), § 388-96-585, filed 5/26/93, effective 6/26/93. Statutory Authority: RCW 74.09.120. 91-22-025 (Order 3270), § 388-96-585, filed 10/29/91, effective 11/29/91. Statutory Authority: RCW 74.09.120 and 74.46.800. 90-09-061 (Order 2970), § 388-96-585, filed 4/17/90, effective 5/18/90. Statutory Authority: RCW 74.46.800. 89-17-030 (Order 2847), § 388-96-585, filed 8/8/89, effective 9/8/89. Statutory Authority: RCW 74.09.180 and 74.46.800. 89-01-095 (Order 2742), § 388-96-585, filed 12/21/88. Statutory Authority: RCW 74.46.800. 87-09-058 (Order 2485), § 388-96-585, filed 4/20/87; 86-10-055 (Order 2372), § 388-96-585, filed 5/7/86, effective 7/1/86; 84-12-039 (Order 2105), § 388-96-585, filed 5/30/84. Statutory Authority: RCW 74.09.120. 83-19-047 (Order 2025), § 388-96-585, filed 9/16/83; 82-21-025 (Order 1892), § 388-96-585, filed 10/13/82; 82-11-065 (Order 1808), § 388-96-585, filed 5/14/82; 81-22-081 (Order 1712), § 388-96-585, filed 11/4/81. Statutory Authority: RCW 74.09.120 and 74.46.800. 81-06-024 (Order 1613), § 388-96-585, filed 2/25/81. Statutory Authority: RCW 74.09.120. 79-04-102 (Order 1387), § 388-96-585, filed 4/4/79. Statutory Authority: RCW 74.08.090 and 74.09.120. 78-06-080 (Order 1300), § 388-96-585, filed 6/1/78; Order 1262, § 388-96-585, filed 12/30/77.]

AMENDATORY SECTION (Amending Order 3896, filed 9/12/95, effective 10/13/95)

WAC 388-96-704  Prospective ((reimbursement)) payment rates. (((1))) The department, as provided in chapter 74.46 RCW and this chapter, shall determine ((or)), adjust, or update prospective Medicaid payment rates for nursing facility services provided to medical care recipients. Each rate, subject to the principles of this chapter and chapter 74.46 RCW, represents a nursing facility's maximum compensation for one resident day of care provided a medical care recipient determined by the department to both require and be eligible to receive nursing facility care.

(((2) A contractor may also be assigned an individual prospective rate for a specific medical care recipient determined by the department to require exceptional care.))

[Statutory Authority: RCW 74.46.800 and 1995 1st sp.s. c 18. 95-19-037 (Order 3896), § 388-96-704, filed 9/12/95, effective 10/13/95. Statutory Authority: RCW 74.46.800. 94-12-043 (Order 3737), § 388-96-704, filed 5/26/94, effective 6/26/94. Statutory Authority: RCW 74.09.120. 82-21-025 (Order 1892), § 388-96-704, filed 10/13/82. Statutory Authority: RCW 74.08.090 and 74.09.120. 78-06-080 (Order 1300), § 388-96-704, filed 6/1/78. Statutory Authority: RCW 74.09.120. 78-02-013 (Order 1264), § 388-96-704, filed 1/9/78.]

AMENDATORY SECTION (Amending WSR 96-15-056, filed 7/16/96, effective 8/16/96)

WAC 388-96-708  Reinstatement of beds previously removed from service under chapter 70.38 RCW--Effect on prospective payment rate. (1) After removing beds from service (banked) under the provisions of chapter 70.38 RCW the contractor may bring back into service beds that were previously banked.

(2) When the contractor returns to service beds banked under the provisions of chapter 70.38 RCW, the department will recalculate the contractor's prospective payment rate allocations based on the ((increased)) facility's anticipated resident occupancy level following the increase in licensed bed capacity.

(3) The effective date of the recalculated prospective rate for beds returned to service:

(a) Between the first and the fifteenth of a month, shall be the first of the month in which the banked beds returned to service; or

(b) Between the sixteenth and the end of a month, shall be the first of the month following the month in which the banked beds returned to service.

(4) The recalculated prospective payment rate shall comply with all the provisions of rate setting contained in chapter 74.46 RCW or in this chapter, including all lids and maximums unless otherwise specified in this section. ((All))

(5) The recalculated prospective Medicaid payment ((rates from July 1, 1995 through June 30, 1998 shall remain in effect until an adjustment can be made for economic trends and conditions as authorized by chapter 74.46 RCW and this chapter)) rate shall be subject to adjustment if required by RCW 74.46.421.

[Statutory Authority: RCW 74.46.800. 96-15-056, § 388-96-708, filed 7/16/96, effective 8/16/96.]

AMENDATORY SECTION (Amending WSR 97-17-040, filed 8/14/97, effective 9/14/97)

WAC 388-96-709  Prospective rate revisions--Reduction in licensed beds. (1) The department will revise a contractor's prospective rate when the contractor reduces the number of its licensed beds and:

(a) Notifies the department in writing thirty days before the licensed bed reduction; and

(b) Supplies a copy of the new bed license and documentation of the number of beds sold, exchanged or otherwise placed out of service, along with the name of the contractor that received the beds, if any; and

(c) Requests a rate revision.

(2) The revised prospective rate shall comply with all the provisions of rate setting contained in chapter 74.46 RCW and in this chapter, including all lids and maximums, unless otherwise specified in this section ((and shall remain in effect until an adjustment can be made for economic trends and conditions as authorized by chapter 74.46 RCW and this chapter)).

(3) The revised prospective payment rate shall be effective the first of a month determined ((by where in the month the effective date of the licensed bed reduction occurs or the date the contractor complied with subsections 1(a), (b), and (c) of this section)) as follows:

(a) ((If)) When the contractor ((complied)) complies with subsection (1)(((a),)) (b)((,)) and (c) of this section and the effective date of the licensed bed reduction falls:

(i) Between the first and the fifteenth of the month, then the revised prospective rate is effective the first of the month in which the licensed bed reduction occurs; or

(ii) Between the sixteenth and the end of the month, then the revised prospective rate is effective the first of the month following the month in which the licensed bed reduction occurs((; or)).

(b) ((When the contractor fails to comply with subsection 1(a) of this section, then the date the department receives from the contractor the documentation that is required by subsection (1)(b) and (c) of this section shall become the effective date of the reduction for the purpose of applying subsection (3)(a)(i) and (ii) of this section.

(4) For all prospective Medicaid payment rates from July 1, 1995 through June 30, 1998,)) The department shall revise a nursing facility's prospective rate to reflect a reduction in licensed beds as follows:

(((a))) (i) The department shall use the reduced total number of licensed beds to determine occupancy used to calculate the ((nursing services, food, administrative and operational)) direct care, therapy care, support services and operations rate component((s per WAC 388-96-719)) allocations. If actual occupancy from the ((1994)) rate base cost report ((was)) is:

(((i))) (A) At or over ((ninety)) eighty-five percent before the reduction and remains at or above ((ninety)) eighty-five percent, there will be no change to the component((s)) allocations;

(((ii))) (B) Less than ((ninety)) eighty-five percent before the reduction and changes to at or above ((ninety)) eighty-five percent, then recompute the components using actual ((1994)) rate based resident days; or

(((iii))) (C) Less than ((ninety)) eighty-five percent before the reduction and remains below ((ninety)) eighty-five percent, then recompute the components using the change in resident days from the ((1994)) rate base cost report resulting from the reduced number of licensed beds used to calculate the ((ninety)) eighty-five percent.

(((b))) (ii) To determine occupancy used to calculate the property and return on investment (ROI) ((components per WAC 388-96-719)) rate component allocations, the department shall use the facility's anticipated resident occupancy level subsequent to the decrease in licensed bed capacity as long as the occupancy for the reduced number of beds is at or above ((ninety)) eighty-five percent((. Subject to the provisions of chapter 388-96 WAC and chapter 74.46 RCW,)) and in no case shall the department use less than ((ninety)) eighty-five percent occupancy of the facility's reduced licensed bed capacity.

[Statutory Authority: RCW 74.46.510. 97-17-040, § 388-96-709, filed 8/14/97, effective 9/14/97. Statutory Authority: RCW 74.46.800 and 1995 1st sp.s. c 18. 95-19-037 (Order 3896), § 388-96-709, filed 9/12/95, effective 10/13/95. Statutory Authority: RCW 74.46.800. 94-12-043 (Order 3737), § 388-96-709, filed 5/26/94, effective 6/26/94. Statutory Authority: RCW 74.46.800, 74.46.450 and 74.09.120. 93-12-051 (Order 3555), § 388-96-709, filed 5/26/93, effective 6/26/93.]

AMENDATORY SECTION (Amending Order 3896, filed 9/12/95, effective 10/13/95)

WAC 388-96-710  Prospective ((reimbursement)) payment rate for new contractors. (1) The department shall establish an initial prospective Medicaid payment rate for a new contractor as defined under WAC 388-96-026 (((1)(a) or (b))) within sixty days following ((receipt by the department of a properly completed projected budget (see WAC 388-96-026))) the new contractor's application and approval for a license to operate the facility under chapter 18.51 RCW. The rate shall take effect as of the effective date of the contract, except as provided in this section, and shall comply with all the provisions of rate setting contained in chapter 74.46 RCW and in this chapter, including all lids and maximums set forth.

(2) Except for quarterly updates per chapter 74.46 RCW as amended by E2SHB 2935 (section 24 (7)(c), chapter 322, Laws of 1998), the rate established for a new contractor as defined in WAC 388-96-026 (1)(a) or (b) shall remain in effect for the nursing facility until the rate can be reset effective July 1 using the first cost report for that facility under the new contractor's operation containing at least six months' data from the prior calendar year, regardless of whether reported costs for facilities operated by other contractors for the prior calendar year in question will be used to cost rebase their July 1 rates. The new contractor's rate thereafter shall be cost rebased only as provided in this ((subsection only once during the period July 1, 1995 through June 30, 1998)) chapter and chapter 74.46 RCW.

(((2))) (3) To set the initial prospective Medicaid payment rate for a new contractor as defined in WAC 388-96-026 (1)(a) and (b), the department shall:

(a) Determine whether the new contractor nursing facility belongs to the metropolitan statistical area (MSA) peer group or the non-MSA peer group using the latest information received from the office of management and budget or the appropriate federal agency;

(b) Select all nursing facilities from the department's records of all the current Medicaid nursing facilities in the new contractor's peer group with the same bed capacity plus or minus ten beds. If the selection does not result in at least seven facilities, then the department will increase the bed capacity by plus or minus five bed increments until a sample of at least seven nursing facilities is obtained;

(c) Based on the information for the nursing facilities selected under subsection (((2))) (3)(b) of this section and available to the department on the day the new contractor began participating in the Medicaid payment rate system at the facility, rank from the highest to the lowest the component ((rates in nursing services, food, administrative)) rate allocation in direct care, therapy care, support services, and ((operational)) operations cost centers and based on this ranking:

(i) Determine the middle of the ranking and then identify the rate immediately above the median for each cost center identified in subsection (((2))) (3)(c) of this section. The rate immediately above the median will be known as the "selected rate" for each cost center; ((and))

(ii) Set the new contractor's nursing facility component ((rates)) rate allocation for ((each cost center identified in subsection (2)(c))) therapy care, support services, and operations at the ((lower of)) the "selected rate" ((or the budget rate)); ((and))

(iii) Set the direct care rate using data from the direct care "selected" rate facility identified in (c) of this subsection as follows:

(A) The cost per case mix unit shall be the rate base allowable case mixed direct care cost per patient day for the direct care "selected" rate facility, whether or not that facility is held harmless under WAC 388-96-728 and 388-96-729, divided by the facility average case mix index per WAC 388-96-741;

(B) The cost per case mix unit determined under (c)(iii)(A) of this subsection shall be multiplied by the Medicaid average case mix index per WAC 388-96-740. The product shall be the new contractors direct care rate under case mix; and

(C) The department shall not apply chapter 74.46 RCW as amended by E2SHB 2935 (section 25 (5)(k), chapter 322, Laws of 1998) to any direct care rate established under subsection (5)(e) or (f) of this section. A new contractor whose direct care rate was established under subsection (5)(c) or (f) of this section is not eligible to be paid by a "hold harmless" rate as determined under chapter 74.46 RCW as amended by E2SHB 2935 (section 25 (5)(k), chapter 322, Laws of 1998);

(iv) Set the property rate in accordance with the provisions of this chapter and chapter 74.46 RCW; and

(((iv))) (v) Set the return on investment rate in accordance with the provisions of this chapter and chapter 74.46 RCW. In computing the financing allowance, the department shall use for ((the nursing services, food, administrative,)) direct care, therapy care, support services and ((operational)) operations cost centers the rates set pursuant to subsection (((2))) (3)(c)(i) ((and)), (ii) and (iii) of this section.

(d) Any subsequent revisions to the rate component((s)) allocations of the sample members will not impact a "selected rate" component allocation of the initial prospective rate established for the new contractor under this subsection((; unless, a "selected rate" identified in subsection (2)(c) is at the median cost limit established for July 1, then the median cost limit established after October 31 for that "selected rate" component becomes the component rate for the new contractor)).

(((3))) (4) For the WAC 388-96-026 (1)(a) or (b) new contractor, the department shall establish ((rates)) rate component allocations for:

(a) ((Nursing services, food, administrative)) Direct care, therapy care, support services and ((operational)) operations cost centers based on the "selected rates" as determined under subsection (((2))) (3)(c) of this section that are in effect on the date the new contractor began participating in the program; and

(b) Property in accordance with the provisions of this chapter and chapter 74.46 RCW using for the new contractor as defined under:

(i) WAC 388-96-026 (1)(a), information from the certificate of need; or

(ii) WAC 388-96-026 (1)(b), information provided by the new contractor within ten days of the date the department requests the information in writing. If the contractor as defined under WAC 388-96-026 (1)(b), has not provided the requested information within ten days of the date requested, then the property rate will be zero. The property rate will remain zero until the information is received.

(c) Return on investment rate in accordance with the provisions of this chapter and chapter 74.46 RCW using the "selected rates" established under subsection (((2))) (3)(c) of this section that are in effect on the date the new contractor began participating in the program, to compute the working capital provision and variable return for the new contractor as defined under:

(i) WAC 388-96-026 (1)(a), information from the certificate of need; or

(ii) WAC 388-96-026 (1)(b), information provided by the new contractor within ten days of the date the department requests the information in writing. If the contractor as defined under WAC 388-96-026 (1)(b), has not provided the requested information within ten days of the date requested, then the net book value of allowable assets will be zero. The financing allowance rate component will remain zero until the information is received.

(((4))) (5) The initial prospective payment rate for a new contractor as defined under WAC 388-96-026 (1)(a) or (b) shall be established under subsections (3) and (4) of this section. If the WAC 388-96-026 (1)(a) or (b) contractor's initial rate:

(a) Was set before January 1, 1997, and the contractor does not have six months or greater of cost report data for 1996, the October 1, 1998, rate will be set using the contractor's 1997 cost report. Its July 1, 1999, and July 1, 2000, rates will not be cost rebased;

(b) Was set between January 1, 1997, and June 30, 1997, the October 1, 1998, rate will be set using the contractor's 1997 cost report. Its July 1, 1999, and July 1, 2000, rates will not be cost rebased;

(c) Was set between July 1, 1997, and June 30, 1998, the October 1, 1998, rate will be the revised initial sample based rate using October 1, 1998, rate data for direct care, therapy care, support services, and operations, and following the steps identified in subsection (3)(c)(i) and (ii) of this section. There will be no change to the facilities identified in the initial rate under subsection (3)(b) of this section. There will be no change to the property rate. The financing allowance will be revised. The contractor's July 1, 1999, rate will be rebased using 1998 cost report data. Its July 1, 2000, rate will not be cost rebased;

(d) Was set between July 1, 1998, and September 30, 1998, the October 1, 1998, rate will be the revised initial sample based rate using October 1, 1998, rate data for direct care, therapy care, support services, and operations, and following the steps identified in subsection (3)(c)(i) and (ii) of this section. There will be no change to the facilities identified in the initial rate under subsection (3)(b) of this section. There will be no change to the property rate. The financing allowance will be revised. The July 1, 1999, rate will be revised in the same manner using July 1, 1999, rate data. The July 1, 2000, rate will be rebased using 1999 cost report data;

(e) Is set between October 1, 1998, and June 30, 1999, the initial rate is set in accordance with subsections (3) and (4) of this section. The July 1, 1999, rate will be the revised initial sample based rate using July 1, 1999, rate data for direct care, therapy care, support services, and operations, and following the steps identified in subsection (3)(c)(i) and (ii) of this section. There will be no change to the facilities identified in the initial rate under subsection (3)(b) of this section. There will be no change to the property rate. The financing allowance will be revised. The July 1, 2000, rate will be rebased using 1999 cost report data; or

(f) Is set between July 1, 1999, and June 30, 2000, the initial rate is set in accordance with subsections (3) and (4) of this section. The July 1, 2000, rate will be the revised initial sample based rate using July 1, 2000, rate data for direct care, therapy care, support services, and operations, and following the steps identified in subsection (3)(c)(i) and (ii) of this section. There will be no change to the facilities identified in the initial rate under subsection (3)(b) of this section. There will be no change to the property rate. The financing allowance will be revised.

(6) For the WAC 388-96-026 (1)(c) new contractor, the initial prospective ((reimbursement)) payment rate ((for a new contractor as defined under WAC 388-96-026 (1)(c))) shall be the last prospective ((reimbursement)) payment rate ((paid by)) the department paid to the Medicaid contractor operating the nursing facility immediately prior to the effective date of the new Medicaid contract or assignment. If the WAC 388-96-026 (1)(c) contractor's initial rate:

(a) Was set before January 1, ((1995)) 1997, and the new contractor does not have a cost report containing at least six months' data from 1996, its ((July 1, 1995)) October 1, 1998, rate will be set by using twelve months of cost report data derived from the old contractor's data and the new contractor's data for the ((1994)) 1996 cost report year and its July 1, ((1996)) 1999, and July 1, ((1997)) 2000, rates will not be cost rebased;

(b) Was set between January 1, ((1995)) 1997, and ((June 30, 1995, its July 1, 1995)) September 30, 1998, its October 1, 1998, rate will be set by using the old contractor's ((1994)) 1996 twelve months' cost report data and its July 1, ((1996)) 1999, and July 1, ((1997)) 2000, rates will not be cost rebased; or

(c) Is set on or after ((July 1, 1995)) October 1, 1998, its July 1, ((1996)) 1999, and July 1, ((1997)) 2000, rates will not be cost rebased.

(((5))) (7) A prospective payment rate set for ((a)) all new contractors shall be subject to adjustments for economic ((tends)) trends and conditions as authorized and provided in this chapter and in chapter 74.46 RCW. For the WAC 388-96-026 (1)(a) or (b) new contractor, to adjust the October 1, 1998, payment rate for economic trends and conditions, the department shall apply a 2.96 percent inflation factor to direct care, therapy care, support services, and operations rate components.

(((6) A new contractor whose Medicaid contract was effective in calendar year 1994 and whose nursing facility occupancy during calendar year 1994 increased by at least five percent over that of the prior operator, shall have its July 1, 1995 component rates for the nursing services, food, administrative, operational and property cost centers, and its the return on investment (ROI) component rate, based upon a minimum occupancy of eighty-five percent.

(7) Notwithstanding any other provision in this chapter, for rates effective July 1, 1995 and following, for nursing facilities receiving original certificate of need approval prior to June 30, 1988, and commencing operations on or after January 1, 1995, the department shall base initial nursing services, food, administrative, and operational rate components on such component rates immediately above the median for facilities in the same county. Property and return on investment rate components shall be established as provided in chapter 74.46 RCW and this chapter.)) (8) For a WAC 388-96-026 (1)(a)(b) or (c), the Medicaid case mix index and facility average case mix index shall be determined in accordance with this chapter and chapter 74.46 RCW.

[Statutory Authority: RCW 74.46.800 and 1995 1st sp.s. c 18. 95-19-037 (Order 3896), § 388-96-710, filed 9/12/95, effective 10/13/95. Statutory Authority: RCW 74.46.800. 94-12-043 (Order 3737), § 388-96-710, filed 5/26/94, effective 6/26/94; 93-17-033 (Order 3615), § 388-96-710, filed 8/11/93, effective 9/11/93. Statutory Authority: RCW 74.46.800, 74.46.450 and 74.09.120. 93-12-051 (Order 3555), § 388-96-710, filed 5/26/93, effective 6/26/93. Statutory Authority: RCW 74.46.800. 92-16-013 (Order 3424), § 388-96-710, filed 7/23/92, effective 8/23/92. Statutory Authority: 1987 c 476. 88-01-126 (Order 2573), § 388-96-710, filed 12/23/87. Statutory Authority: RCW 74.46.800. 87-09-058 (Order 2485), § 388-96-710, filed 4/20/87. Statutory Authority: RCW 74.09.120. 83-19-047 (Order 2025), § 388-96-710, filed 9/16/83; 78-02-013 (Order 1264), § 388-96-710, filed 1/9/78.]

AMENDATORY SECTION (Amending Order 3896, filed 9/12/95, effective 10/13/95)

WAC 388-96-713  Rate determination. (1) Each nursing facility's Medicaid payment rate for services provided to medical care recipients will be determined, adjusted and updated prospectively as provided in this chapter and in chapter 74.46 RCW ((to be effective July 1 of 1995, 1996, and 1997 and may be adjusted more frequently to take into account program changes)).

(2) If the contractor participated in the program for less than six months of the prior calendar year, its rates will be determined by procedures set forth in WAC 388-96-710.

(3) ((Beginning with rates effective July 1, 1984,)) Contractors submitting correct and complete cost reports by March 31st, shall be notified of their rates by July 1st, unless circumstances beyond the control of the department interfere.

[Statutory Authority: RCW 74.46.800 and 1995 1st sp.s. c 18. 95-19-037 (Order 3896), § 388-96-713, filed 9/12/95, effective 10/13/95. Statutory Authority: RCW 74.46.800 and 74.09.120. 93-19-074 (Order 3634), § 388-96-713, filed 9/14/93, effective 10/15/93; 90-09-061 (Order 2970), § 388-96-713, filed 4/17/90, effective 5/18/90. Statutory Authority: RCW 74.09.120. 83-19-047 (Order 2025), § 388-96-713, filed 9/16/83; 81-15-049 (Order 1669), § 388-96-713, filed 7/15/81; 80-06-122 (Order 1510), § 388-96-713, filed 5/30/80, effective 7/1/80; 78-02-013 (Order 1264), § 388-96-713, filed 1/9/78.]

NEW SECTION

WAC 388-96-723  How often will the department compare the state-wide weighted average payment rate for all nursing facilities with the state-wide weighted average payment rate identified in the Biennial Appropriations Act? (1) On a monthly basis, the department will compare the state-wide weighted average payment rate for all nursing facilities with the state-wide weighted average payment rate identified in the Biennial Appropriations Act. To determine the state-wide weighted average payment rate, the department shall use total billed Medicaid days and total billed Medicaid dollars.

(2) Under RCW 74.46.421, the department must implement a reduction in all nursing facilities' component rates any time its comparison indicates that the state-wide weighted average payment rate for all nursing facilities:

(a) Exceeds the state-wide weighted average payment rate identified in the Biennial Appropriations Act; or

(b) Is likely to exceed the state-wide weighted average payment rate identified in the Biennial Appropriations Act.

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NEW SECTION

WAC 388-96-724  How much advance notice will a nursing facility receive of a rate reduction? (1) The department will notify the nursing facility at least twenty-eight calendar days in advance of the effective date of a reduction taken under RCW 74.46.421.

(2) The rate reduction taken under RCW 74.46.421 will be effective the first day of the month following the twenty-eight calendar day advance notice.

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NEW SECTION

WAC 388-96-725  After the rate reductions when will a nursing facility's rates return to their previous level? (1) The rate reductions to all nursing facilities' component rates taken in accordance with RCW 74.46.421 will not be reversed.

(2) If after a reduction a nursing facility is eligible to receive an increase in a component rate for some unrelated change, e.g., a change in the Medicaid case mix index causes the direct care rate to increase, it may do so. However, the department must apply the increase to the rate reduced by application of RCW 74.46.421.

(3) Reductions made under RCW 74.46.421 are cumulative. When a monthly comparison indicates that the state-wide weighted average payment rate for all nursing facilities will exceed or exceeds the state-wide weighted average payment rate identified in the Biennial Appropriations Act, under RCW 74.46.421, the department must reduce the component rates for all nursing facilities without reversing any previous reductions or forgoing any future reductions.

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NEW SECTION

WAC 388-96-726  If a nursing facility's component rates are below the state-wide weighted average payment rate identified in the Biennial Appropriations Act, will the department reduce the facility's component rates when it makes a rate reduction under RCW 74.46.421? (1) Irrespective of whether an individual nursing facility's component rates are below the state-wide weighted average payment rate identified in the Biennial Appropriations Act, the department must reduce the nursing facility's component rates as required under RCW 74.46.421.

(2) The department shall not exempt any nursing facility from a component rates reduction required by RCW 74.46.421 for any circumstance, e.g., billed Medicaid days, under-spending of the biennial appropriation for nursing facility rates, etc.

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NEW SECTION

WAC 388-96-728  How will the nursing facility's "hold harmless" direct care rate be determined? For October 1, 1998, through June 30, 2000, under chapter 74.46 RCW as amended by E2SHB 2935 (section 25 (5)(k), chapter 322, Laws of 1998), the "hold harmless" direct care rate is the nursing facility's nursing service component rate in effect on June 30, 1998, adjusted as follows:

(1) Subtract allowable therapy costs from the cost report year used to set the facility's June 30, 1998, nursing services rate; and

(2) Add all exceptional care offsets made to reported costs from the cost report year used to set the June 30, 1998, rate.

The department shall adjust the therapy costs and exceptional care offsets for economic trends and conditions used to set the facility's June 30, 1998, rate.

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NEW SECTION

WAC 388-96-729   When will the department use the "hold harmless rate" to pay for direct care services? For October 1, 1998, through June 30, 2000, under section 25 (5)(k), chapter 322, Laws of 1998, the department will use the higher of the "hold harmless" direct care rate determined under WAC 388-96-728 or the direct care rate determined in accordance with chapter 74.46 RCW as amended by E2SHB 2935 (section 25(1) through (5)(g), chapter 322, Laws of 1998), to pay for direct care services.

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NEW SECTION

WAC 388-96-738  What default case mix group and weight must the department use for case mix grouping when there is no minimum data set resident assessment for a nursing facility resident? (1) When a resident:

(a) Dies before the facility completes the resident's initial assessment, the department must assign the assessment to the special care case mix group - SSB. The department must use the case mix weight assigned to the special care case mix group -SSB;

(b) Is discharged to an acute care facility before the nursing facility completes the resident's initial assessment, the department must assign the assessment to the special care case mix group - SSB. The department must use the case mix weight assigned to the special care case mix group - SSB; or

(c) Is discharged for a reason other than those noted above before the facility completes the resident's initial assessment, the department must assign the assessment to the case mix group BC1 with a case mix weight of 1.000.

(2) If the resident assessment is untimely as defined in chapter 74.46 RCW as amended by E2SHB 2935 (section 24, chapter 322, Laws of 1998) and as defined by federal regulations, then the department must assign the case to the default case mix group of BC1 which has a case mix weight of 1.000.

(3) If there is no resident assessment for the first fourteen days of a resident's stay, then the department must assign the case to the default case mix group BC1 with a case mix weight of 1.000.

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NEW SECTION

WAC 388-96-739  How will the department determine which resident assessments are Medicaid resident assessments? The department must identify a Medicaid resident assessment through the review of the minimum data set (MDS) payer source code. If the nursing facility codes the payer source as "Medicaid per diem," regardless of whether any other payer source codes are checked, then the department will count the case as a Medicaid resident assessment.

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NEW SECTION

WAC 388-96-740  What will the department use as the Medicaid case mix index when a facility does not meet the ninety percent minimum data set (MDS) threshold as identified in chapter 74.46 RCW as amended by E2SHB 2935 (section 24, chapter 322, Laws of 1998)? (1) If the nursing facility is newly Medicaid certified after the quarter which will serve as the basis for the Medicaid case mix index, then the department must use the industry average Medicaid case mix index for the quarter specified in E2SHB 2935 (section 24 (7)(c)) as the facility's Medicaid average case mix index.

(2) If the nursing facility does not meet the ninety percent MDS threshold for any other reason, then the department must use the facility's prior quarterly Medicaid case mix index less five percent as the Medicaid case mix index.

(3) For October 1, 1998, through December 31, 1998, when the nursing facility's MDS data for April 1, 1998, through June 30, 1998, used to determine the nursing facility's direct care rate does not meet the ninety percent MDS threshold for any other reason, the department shall use the nursing facility's prior quarterly Medicaid case mix index as the Medicaid case mix index.

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NEW SECTION

WAC 388-96-741  When the nursing facility does not have facility average case mix indexes for the four quarters specified in chapter 74.46 RCW as amended by E2SHB 2935 (section 24 (7)(b), chapter 322, Laws of 1998) for determining the cost per case mix unit, what will the department use to determine the nursing facility's cost per case mix unit? If the nursing facility:

(1) Is newly Medicaid certified after the four quarters specified in chapter 74.46 RCW as amended by E2SHB 2935 (section 24 (7)(b)), then the department must use the industry average case mix index for those four quarters as the facility's average case mix index.

(2) Existed during at least one of the four quarters and met the ninety percent threshold for at least one of the four quarters specified in chapter 74.46 RCW as amended by E2SHB 2935 (section 24 (7)(b)), then the department must use the facility's average case mix index for the quarter that the facility met the ninety percent threshold.

(3) Existed during at least one of the four quarters and did not meet the ninety percent threshold for any of the four quarters, then the department must use the industry average case mix index as the facility's average case mix index.

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NEW SECTION

WAC 388-96-742  When will the department use licensed beds to compute the ninety percent minimum data set (MDS) threshold rather than a nursing facility's quarterly average census? The department will use the number of licensed beds to compute the ninety percent threshold of MDS data when:

(1) The reported census as a result of data entry errors exceeds the number of current licensed beds; or

(2) There is a significant discrepancy between the reported census and the number of current licensed beds. If the census is fifty percent of the number of licensed beds, a significant discrepancy exists.

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NEW SECTION

WAC 388-96-744   How will the department set the therapy care rate and determine the median cost limit per unit of therapy? (1) For a nursing facility that does not report units of therapy for the applicable cost report year, the department will set its nursing facility therapy care rate at $0.00 until units of therapy are submitted.

(2) After the nursing facility reports its units of therapy, the department will pay the nursing facility a rate beginning the effective date of the rate year, e.g., July 1.

(3) In a rebase year the nursing facility's units of therapy must be reported in the cost report used to rebase the rate. If reported later than the cost report due date, the department shall exclude the nursing facility's therapy costs from the array of costs use to set the median cost limit per unit of therapy.

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NEW SECTION

WAC 388-96-746  How much therapy consultant expense for each therapy type will the department allow to be added to the total allowable one-on-one therapy expense? (1) The department will multiply the actual patient days when greater than eighty-five percent or patient days at eighty-five percent occupancy by both:

(a) A nursing facility's adjusted therapy consulting costs per patient day; and

(b) The median adjusted therapy consulting cost plus ten percent.

The lesser of (a) or (b) of this subsection will be reasonable therapy consulting costs that the department shall add to the total allowable one-on-one therapy expense used to calculate the therapy care rate.

(2) To determine the median adjusted therapy consulting cost per type of therapy, the department shall:

(a) Divide Medicaid nursing facilities in the state into two peer groups:

(i) Those facilities located within a metropolitan statistical area; and

(ii) Those not located in a metropolitan statistical area. Metropolitan statistical areas and nonmetropolitan statistical areas shall be as determined by the United States Office of Management and Budget or other applicable federal office.

(b) Array the facilities in each peer group from highest to lowest based on their therapy consulting cost per patient day for each type of therapy.

(c) Determine the median total cost for therapy consulting per patient day costs by MSA and non-MSA peer group and add ten percent to that median cost.

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NEW SECTION

WAC 388-96-747  Constructed, remodeled or expanded facilities. (1) When a facility is constructed, remodeled, or expanded after obtaining a certificate of need or exemption from the requirements for certificate of need for the replacement of existing nursing home beds pursuant to RCW 70.38.115 (13)(a), the department shall determine actual and allocated allowable land cost and building construction cost. Payment for such allowable costs, determined pursuant to the provisions of this chapter, shall not exceed the maximums set forth in this subsection and in subsections (2) and (7) of this section. The department shall determine construction class and types through examination of building plans submitted to the department and/or on-site inspections. The department shall use definitions and criteria contained in the Marshall and Swift Valuation Service published by the Marshall and Swift Publication Company. Buildings of excellent quality construction shall be considered to be of good quality, without adjustment, for the purpose of applying these maximums.

(2) Construction costs shall be final labor, material, and service costs to the owner or owners and shall include:

(a) Architect's fees;

(b) Engineers' fees (including plans, plan check and building permit, and survey to establish building lines and grades);

(c) Interest on building funds during period of construction and processing fee or service charge;

(d) Sales tax on labor and materials;

(e) Site preparation (including excavation for foundation and backfill);

(f) Utilities from structure to lot line;

(g) Contractors' overhead and profit (including job supervision, workmen's compensation, fire and liability insurance, unemployment insurance, etc.);

(h) Allocations of costs which increase the net book value of the project for purposes of Medicaid payment;

(i) Other items included by the Marshall and Swift Valuation Service when deriving the calculator method costs.

(3) The department shall allow such construction costs, at the lower of actual costs or the maximums derived from the sum of the basic construction cost limit plus the common use area limit which corresponds to the type, class and number of total nursing home beds for the new construction, remodel or expansion. The maximum limits shall be calculated using the most current cost criteria contained in the Marshall and Swift Valuation Service and shall be adjusted forward to the midpoint date between award of the construction contract and completion of construction.

(4) When some or all of a nursing facility's common-use areas are situated in a basement, the department shall exclude some or all of the per-bed allowance for common-use areas to derive the construction cost lid for the facility. The amount excluded will be equal to the ratio of basement common-use areas to all common-use areas in the facility times the common-use area limits determined in accordance with subsection (3) of this section. In lieu of the excluded amount, the department shall add an amount calculated using the calculator method guidelines for basements in nursing homes published in the Marshall and Swift Valuation Service.

(5) Subject to provisions regarding allowable land contained in this chapter, allowable costs for land shall be the lesser of:

(a) Actual cost per square foot, including allocations;

(b) The average per square foot land value of the ten nearest urban or rural nursing facilities at the time of purchase of the land in question. The average land value sample shall reflect either all urban or all rural facilities depending upon the classification of urban or rural for the facility in question. The values used to derive the average shall be the assessed land values which have been calculated for the purpose of county tax assessments; or

(c) Land value for new or replacement building construction or substantial building additions requiring the acquisition of land that commenced to operate on or after July 1, 1997, determined in accordance with RCW 74.46.360 (2) and (3).

(6) If allowable costs for construction or land are determined to be less than actual costs pursuant to subsections (1) and (7) of this section, the department may increase the amount if the owner or contractor is able to show unusual or unique circumstances having substantially impacted the costs of construction or land. Actual costs shall be allowed to the extent they resulted from such circumstances up to a maximum of ten percent above levels determined under subsections (3), (4), and (5) of this section for construction or land. An adjustment under this subsection shall be granted only if requested by the contractor. The contractor shall submit documentation of the unusual circumstances and an analysis of their financial impact with the request.

(7) If a capitalized addition or retirement of an asset will result in an increased licensed bed capacity during the calendar year following the capitalized addition or replacement, the department shall use the facility's anticipated resident occupancy level subsequent to the increase in licensed bed capacity as long as the occupancy for the increased number of beds is at or above eighty-five percent. Subject to the provisions of this chapter and chapter 74.46 RCW, in no case shall the department use less than eighty-five percent occupancy of the facility's increased licensed bed capacity. If a capitalized addition, replacement, or retirement results in a decreased licensed bed capacity, WAC 388-96-709 will apply.

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AMENDATORY SECTION (Amending Order 3634, filed 9/14/93, effective 10/15/93)

WAC 388-96-757  ((Reimbursement)) Payment for veterans' homes. (((1) Notwithstanding any other provision of this chapter, reimbursement rates for any nursing facility operated by the state of Washington, department of veterans affairs (DVA) shall, for the 1993/1995 biennium (July 1, 1993 through June 30, 1994 rate setting), be established according to the following procedures:

(a) DVA shall submit separately for each facility an opening-year budget utilizing the 1992 cost report form and instructions designed for all Medicaid nursing facilities reimbursed for services under this chapter;

(b) Each facility budget shall be reviewed and adjusted by staff of the department's office of rates management, aging and adult services administration, utilizing rules of allowability for Medicaid costs contained in this chapter;

(c) The total prospective Medicaid rate for each DVA-operated facility to be effective July 1, 1993 (or effective upon the subsequent opening date of each facility), through June 30, 1995, shall be established at the lower of:

(i) Each facility's budgeted costs submitted by DVA, as reviewed and adjusted by department staff; or

(ii) One hundred fifty dollars per patient day in all cost centers combined.

(d) In the event the limit of one hundred fifty dollars at any DVA facility is exceeded by the total budgeted costs remaining after department review of the facility budget, the department will divide the one hundred fifty dollars limited amount among the costs centers in the following priority: nursing services, food, operational, administrative, property and return on investment (ROI).

(e) Once the rates are established and in effect, DVA may seek rate increases at any time during the 1993/1995 biennium to current-fund additional costs exceeding the rates, but only as authorized under the procedures and substantive criteria in WAC 388-96-774 as employed for all Medicaid facilities reimbursed under this chapter.

(f) Any adjustments for economic trends and conditions in any cost center, effective July 1, 1994 for Medicaid contractors under the provisions of this chapter, shall be extended to the DVA facilities as well.

(g) The DVA facilities shall submit annual facility cost reports on department forms, and according to department instructions applicable to all facilities, for 1993 and for 1994, and settlements for each of these years shall be completed for each DVA facility, with final payment being made at the lower of cost or rate, after all allowable cost center shifting, as for all Medicaid facilities reimbursed under this chapter.

(2) For July 1, 1995 rate setting and following, all rate-setting principles applicable to the DVA facilities shall be developed by the department.)) Payment rates to nursing facilities operated by the state of Washington, department of veterans' affairs shall be determined in accordance with chapter 74.46 RCW and this chapter as for all other facilities.

[Statutory Authority: RCW 74.46.800 and 74.09.120. 93-19-074 (Order 3634), § 388-96-757, filed 9/14/93, effective 10/15/93.]

AMENDATORY SECTION (Amending Order 3185, filed 5/31/91, effective 7/1/91)

WAC 388-96-760  Upper limits to ((reimbursement)) the payment rate. The average ((reimbursement)) rate for the cost report year shall not exceed the contractor's average customary charges to the general public for the services covered by the rate for the same time period((, except that)). The department will pay public facilities rendering such services free of charge or at a nominal charge ((will be reimbursed)) according to the methods and standards set out in this chapter. The contractor shall provide as part of the annual cost report a statement of the average charges for the cost report year for services covered by the payment rate and supporting computations and documentation. The contractor shall immediately inform the department if its ((reimbursement)) payment rate does exceed customary charges for comparable services. If necessary, the department will adjust the payment rate ((will be adjusted)) in accordance with ((WAC 388-96-769)) chapter 74.46 RCW as amended by section 31 of E2SHB 2935, chapter 322, Laws of 1998.

[Statutory Authority: RCW 74.46.800 and 74.09.120. 91-12-026 (Order 3185), § 388-96-760, filed 5/31/91, effective 7/1/91. Statutory Authority: RCW 74.09.120. 84-24-050 (Order 2172), § 388-96-760, filed 12/4/84; 83-19-047 (Order 2025), § 388-96-760, filed 9/16/83; 81-22-081 (Order 1712), § 388-96-760, filed 11/4/81. Statutory Authority: RCW 74.08.090 and 74.09.120. 78-06-080 (Order 1300), § 388-96-760, filed 6/1/78. Statutory Authority: RCW 74.09.120. 78-02-013 (Order 1264), § 388-96-760, filed 1/9/78.]

AMENDATORY SECTION (Amending WSR 97-17-040, filed 8/14/97, effective 9/14/97)

WAC 388-96-776  Add-ons to the ((prospective)) payment rate--Capital improvements. (1) The department shall grant an add-on to a ((prospective)) payment rate for any capitalized additions or replacements made as a condition for licensure or certification; provided, the net rate effect is ten cents per patient day or greater.

(2) The department shall grant an add-on to a prospective rate for capitalized improvements done under ((RCW 74.46.465)) chapter 74.46 RCW as amended by E2SHB 2935 (section 19(12), chapter 322, Laws of 1998); provided, the legislature specifically appropriates funds for capital improvements for the biennium in which the request is made and the net rate effect is ten cents per patient day or greater. Physical plant capital improvements include, but are not limited to, capitalized additions, replacements or renovations made as a result of an approved certificate of need or exemption from the requirements for certificate of need for the replacement of existing nursing ((home)) facility beds pursuant to RCW 70.38.115 (13)(a) or capitalized additions or renovations for the removal of physical plant waivers.

(3) Rate add-ons granted pursuant to subsection (1)((,)) or (2) ((or (16))) of this section shall be limited in total amount each fiscal year to the total current legislative appropriation, if any, specifically made to fund the Medicaid share of such rate add-ons for the fiscal year. Rate add-ons are subject to the provisions of RCW 74.46.421.

(4) When physical plant improvements made under subsection (1) or (2) of this section are completed in phases, the department shall not grant a rate add-on for any addition, replacement or improvement until each phase is completed and fully utilized for which it was intended. The department shall limit rate add-on to only the actual cost of the depreciable tangible assets meeting the criteria of ((WAC 388-96-557)) RCW 74.46.330 and as applicable to that specific completed and fully utilized phase.

(5) When the construction class of any portion of a newly constructed building will improve as the result of any addition, replacement or improvement occurring in a later, but not yet completed and fully utilized phase of the project, the most appropriate construction class, as applicable to that completed and fully utilized phase, will be assigned for purposes of calculating the rate add-on. The department shall not revise the rate add-on retroactively after completion of the portion of the project that provides the improved construction class. Rather, the department shall calculate a new rate add-on when the improved construction class phase is completed and fully utilized and the rate add-on will be effective in accordance with subsection (9) of this section using the date the class was improved.

(6) The department shall not add on construction fees as defined in WAC ((388-96-745(6))) 388-96-747 and other capitalized allowable fees and costs as related to the completion of all phases of the project to the rate until all phases of the entire project are completed and fully utilized for the purpose it was made. At that time, the department shall add on these fees and costs to the rate, effective no earlier than the earliest date a rate add-on was established specifically for any phase of this project. If the fees and costs are incurred in a later phase of the project, the add-on to the rate will be effective on the same date as the rate add-on for the actual cost of the tangible assets for that phase.

(7) The contractor requesting an adjustment under subsection (1) or (2) shall submit a written request to the office of rates management separate from all other requests and inquiries of the department, e.g., WAC 388-96-904 (1) and (5). A complete written request shall include the following:

(a) A copy of documentation requiring completion of the addition or replacements to maintain licensure or certification for adjustments requested under subsection (1) of this section;

(b) A copy of the new bed license, whether the number of licensed beds increases or decreases, if applicable;

(c) All documentation, e.g., copies of paid invoices showing actual final cost of assets and/or service, e.g., labor purchased as part of the capitalized addition or replacements;

(d) Certification showing the completion date of the capitalized additions or replacements and the date the assets were placed in service per ((WAC 388-96-559(2))) RCW 74.46.360;

(e) A properly completed depreciation schedule for the capitalized additions or replacement as provided in this chapter;

(f) A written justification for granting the rate increase; and

(g) For capitalized additions or replacements requiring certificate of need approval, a copy of the approval and description of the project.

(8) The department's criteria used to evaluate the request may include, but is not limited to:

(a) The remaining functional life of the facility and the length of time since the facility's last significant improvement;

(b) The amount and scope of the renovation or remodel to the facility and whether the facility will be better able to serve the needs of its residents;

(c) Whether the improvement improves the quality of living conditions of the residents;

(d) Whether the improvement might eliminate life safety, building code, or construction standard waivers;

(e) Prior survey results; and

(f) A review of the copy of the approval and description of the project.

(9) The department shall not grant a rate add-on effective earlier than sixty days prior to the receipt of the initial written request by the office of rates management and not earlier than the date the physical plant improvements are completed and fully utilized. The department shall grant a rate add-on for an approved request as follows:

(a) If the physical plant improvements are completed and fully utilized during the period from the first day to the fifteenth day of the month, then the rate will be effective on the first day of that month; or

(b) If the physical plant improvements are completed and fully utilized during the period from the sixteenth day and the last day of the month, the rate will be effective on the first day of the following month.

(10) If the initial written request is incomplete, the department will notify the contractor of the documentation and information required. The contractor shall submit the requested information within fifteen calendar days from the date the contractor receives the notice to provide the information. If the contractor fails to complete the add-on request by providing all the requested documentation and information within the fifteen calendar days from the date of receipt of notification, the department shall deny the request for failure to complete.

(11) If, after the denial for failure to complete, the contractor submits a written request for the same project, the date of receipt for the purpose of applying subsection (9) of this section will depend upon whether the subsequent request for the same project is complete, i.e., the department does not have to request additional documentation and information in order to make a determination. If a subsequent request for funding of the same project is:

(a) Complete, then the date of the first request may be used when applying subsection (9) of this section; or

(b) Incomplete, then the date of the subsequent request must be used when applying subsection (9) of this section even though the physical plant improvements may be completed and fully utilized prior to that date.

(12) The department shall respond, in writing, not later than sixty calendar days after receipt of a complete request.

(13) If the contractor does not use the funds for the purpose for which they were granted, the department shall immediately recoup the misspent or unused funds.

(14) When any physical plant improvements made under subsection (1) or (2) of this section results in a change in licensed beds, any rate add-on granted will be subject to the provisions regarding the number of licensed beds, patient days, occupancy, etc., included in this chapter and chapter 74.46 RCW.

(15) All rate components to fund the Medicaid share of nursing facility new construction or refurbishing projects costing in excess of one million two hundred thousand dollars, or projects requiring state or federal certificate of need approval, shall be based upon a minimum facility occupancy of eighty-five percent for the ((nursing services, food, administrative, operational)) direct care, therapy care, support services, operations and property cost centers, and the return on investment (ROI) rate component, during the initial rate period in which the adjustment is granted. These same component rates shall be based upon a minimum facility occupancy of ((ninety)) eighty-five percent for all rate periods after the initial rate period.

(16) ((If a rate add-on granted under the authority of this section for a capitalized addition or replacement results in an increase in property taxes, the department may grant an additional rate add-on to fund the Medicaid share of any increase in property taxes. A rate add-on granted under this subsection shall be effective the first day of the month the tax increase is effective.)) When a capitalized addition or replacement results in an increased licensed bed capacity during the calendar year following the capitalized addition or replacement:

(a) The department shall for:

(i) Property, use the facility's anticipated resident occupancy level subsequent to the increase in licensed bed capacity; and

(ii) The financing allowance, multiply the net invested funds by ten percent and divide by the facility's anticipated resident occupancy level subsequent to the increase in licensed bed capacity; and

(b) The anticipated resident occupancy for the increased number of beds must be at or above eighty-five percent. Subject to the provisions of this chapter and chapter 74.46 RCW, in no case shall the department use less than eighty-five percent occupancy of the facility's increased licensed bed capacity.

[Statutory Authority: RCW 74.46.465. 97-17-040, § 388-96-776, filed 8/14/97, effective 9/14/97. Statutory Authority: RCW 74.46.800. 96-15-056, § 388-96-776, filed 7/16/96, effective 8/16/96. Statutory Authority: RCW 74.46.800 and 1995 1st sp.s. c 18. 95-19-037 (Order 3896), § 388-96-776, filed 9/12/95, effective 10/13/95. Statutory Authority: RCW 74.46.800. 94-12-043 (Order 3737), § 388-96-776, filed 5/26/94, effective 6/26/94.]

AMENDATORY SECTION (Amending Order 3896, filed 9/12/95, effective 10/13/95)

WAC 388-96-901  Disputes. (1) ((If a reimbursement rate issued to a contractor is believed to be incorrect because it is based on errors or omissions by the contractor or department, the contractor may request an adjustment pursuant to WAC 388-96-769.)) Pursuant to WAC 388-96-904(1), a contractor may ((within twenty-eight days)) request an administrative review conference within twenty-eight calendar days after notification of ((an adjustment or refusal to adjust)) a department action.

(2) ((For all nursing facility prospective Medicaid payment rates effective on or after July 1, 1995, and for all settlements and audits issued on or after July 1, 1995, regardless of what periods the settlements or audits may cover,)) If a contractor wishes to contest the way in which a statute or department rule relating to the nursing facility Medicaid payment ((rate)) system was applied to the contractor by the department, ((e.g., in setting a payment rate or determining a disallowance at audit, it)) the contractor shall pursue the administrative review process ((set out)) prescribed in WAC 388-96-904.

(a) Adverse actions taken under the authority of this chapter or chapter 74.46 RCW subject to administrative review under WAC 388-96-904 include but are not limited to:

(i) Determining a nursing facility payment rate;

(ii) Calculating a nursing facility settlement;

(iii) Imposing a civil fine on the nursing facility;

(iv) Suspending payment to the nursing facility; or

(v) Refusing to contract with the nursing facility.

(b) Adverse actions taken under the authority of this chapter or chapter 74.46 RCW not subject to administrative review under WAC 388-96-904 include but are not limited to those taken under the authority of RCW 74.46.421 and sections of this chapter implementing RCW 74.46.421.

(3) ((If a contractor wishes to challenge the legal validity of a statute, rule or contract provision or wishes to bring a challenge based in whole or in part on federal law, including but not limited to issues of procedural or substantive compliance with the federal Medicaid minimum payment standard known as the Boren Amendment, found at 42 USC 1396a (a)(13)(A) and in federal regulation, as it applies to long-term care facility services, the administrative review procedure authorized in WAC 388-96-904 may not be used for these purposes. This prohibition shall apply regardless of whether the contractor wishes to obtain a decision or ruling on an issue of validity or federal compliance or wishes only to make a record for the purpose of subsequent judicial review.)) The administrative review process prescribed in WAC 388-96-904 shall not be used to contest or review unrelated or ancillary department actions, whether review is sought to obtain a ruling on the merits of a claim or to make a record for subsequent judicial review or other purpose. If an issue is raised that is not subject to review under WAC 388-96-904, the presiding office shall dismiss such issue with prejudice to further review under the provisions of WAC 388-96-904, but without prejudice to other administrative or judicial review as may be provided by law. Unrelated or ancillary actions not eligible for administrative review under WAC 388-96-904 include but are not limited to:

(a) Challenges to the adequacy or validity of the public process followed by department in proposing or making a change to the nursing facility Medicaid payment rate methodology, as required by 42 U.S.C. 1396a (a)(13)(A) and WAC 388-96-718;

(b) Challenges to the nursing facility Medicaid payment system that are based in whole or in part on federal laws, regulations, or policies;

(c) Challenges to a contractor's rate that are based in whole or in part of federal laws, regulations, or policies;

(d) Challenges to the legal validity of a statute or regulation;

(e) Issues relating to case mix accuracy review of minimum data set (MDS) nursing facility resident assessments, which shall be limited to separate administrative review under the provisions of WAC 388-96-905.

(f) Quarterly rate updates to reflect changes in a facility's resident case mix; and

(g) Issues relating to any action of the department affecting a Medicaid beneficiary or provider that were not commenced by the office of rates management, aging and adult services administration, for example, entitlement to or payment for durable medical equipment or other services.

(4) If a contractor wishes to challenge the legal validity of a statute((, rule)) or ((contract provision)) regulation relating to the nursing facility Medicaid payment ((rate)) system, or wishes to bring a challenge based in whole or in part on federal law, it must bring such action de novo in a court of proper jurisdiction as may be provided by law.

[Statutory Authority: RCW 74.46.800 and 1995 1st sp.s. c 18. 95-19-037 (Order 3896), § 388-96-901, filed 9/12/95, effective 10/13/95. Statutory Authority: RCW 74.46.800 and 74.09.120. 91-12-026 (Order 3185), § 388-96-901, filed 5/31/91, effective 7/1/91. Statutory Authority: RCW 74.09.120. 82-21-025 (Order 1892), § 388-96-901, filed 10/13/82; Order 1262, § 388-96-901, filed 12/30/77.]

AMENDATORY SECTION (Amending WSR 96-15-056, filed 7/16/96, effective 8/16/96)

WAC 388-96-904  Administrative review--Adjudicative proceeding. (1) ((The provisions of this section shall apply to administrative review of all nursing facility payment rates effective on and after July 1, 1995, and to administrative review of all audits and settlements issued on or after this date, regardless of what payment period the audit or settlement may cover.)) Contractors seeking to appeal or take exception to an action or determination of the department, under authority of this chapter or chapter 74.46 RCW, relating to the contractor's payment rate, audit or settlement, or otherwise affecting the level of payment to the contractor, or seeking to appeal or take exception to any other adverse action taken under authority of this chapter or chapter 74.46 RCW eligible for administrative review under this section, shall request an administrative review conference in writing within twenty-eight calendar days after receiving notice of the department's action or determination. The department shall deem the contractor ((shall be deemed)) to have received the department's notice five calendar days after the date of the notification letter, unless proof of the date of receipt of the department's notification letter exists, ((then)) in which case the actual date of receipt shall be used to determine timeliness of the contractor's request for an administrative review conference. The contractor's request for administrative review shall:

(a) Be signed by the contractor or by a partner, officer, or authorized employee of the contractor((, shall));

(b) State the particular issues raised; and

(c) Include all necessary supporting documentation or other information.

(2) After receiving a request for administrative review conference that meets the criteria in subsection (1) of this section, the department shall schedule an administrative review conference ((to be held within ninety calendar days after receiving the contractor's request. By agreement this time may be extended up to sixty additional days, but a conference shall not be scheduled or held beyond one hundred fifty calendar days after the department receives the contractor's request for administrative review)). The conference may be conducted by telephone.

(3) At least fourteen calendar days prior to the scheduled date of the administrative review conference, the contractor must supply ((the)) any additional or supporting documentation or information upon which the contractor intends to rely in presenting its case. In addition, the department may request at any time prior to issuing a ((decision)) determination any documentation or information needed to decide the issues raised, and the contractor must comply with such a request within fourteen calendar days after it is received. The department may extend this period ((may be extended)) up to fourteen additional calendar days for good cause shown if the contractor requests an extension in writing received by the department before expiration of the initial fourteen-day period. The department shall dismiss issues ((which)) that cannot be decided or resolved due to a contractor's failure to provide requested documentation or information within the required period ((shall be dismissed)).

(4) The department shall, within sixty calendar days after ((the)) conclusion of the conference, render a ((decision)) determination in writing addressing the issues raised((, unless)). If the department is waiting for additional documentation or information promised by or requested from the contractor pursuant to subsection (3) of this section, ((in which case)) the sixty-day period shall not commence until the department's receipt of such documentation or information or until expiration of the time allowed to provide it. The ((decision)) determination letter shall include a notice of dismissal of all issues which cannot be decided due to ((missing)) a contractor's failure to provide documentation or information promised or requested.

(5) A contractor seeking further review of a ((decision)) determination issued pursuant to subsection (4) of this section((:

(a))) shall ((request)) apply for an adjudicative proceeding, in writing, signed by one of the individuals authorized by subsection (1) of this section, within twenty-eight calendar days after receiving the department's administrative review conference determination letter((, an)). A review judge or other presiding officer employed by the department's board of appeals shall conduct the adjudicative proceeding ((to be conducted by a presiding officer employed by the department's office of appeals; or

(b) Shall file, in the event the parties are able to stipulate to a record that can serve as the record for judicial review, a petition for judicial review pursuant to RCW 34.05.570(4))).

The contractor shall be deemed to have received notice of the department's ((administrative review conference)) determination five calendar days after the date of the administrative review determination letter, unless proof of the date of receipt of the ((department's administrative review determination)) letter exists, ((then)) in which case the actual date of receipt shall be used to determine timeliness of the contractor's ((request)) application for an adjudicative proceeding. The contractor shall attach to its ((request)) application for an adjudicative proceeding the department's administrative review conference determination letter. A contractor's application for an adjudicative proceeding shall be addressed to the department's board of appeals.

(6) Except as authorized by subsection (7) of this section, the scope of an adjudicative proceeding shall be limited to the issues specifically raised by the contractor at the administrative review conference((;)) and addressed on the merits in the department's administrative review conference determination letter ((and stated in the contractor's request for adjudicative proceeding)). The contractor shall be deemed to have waived all issues ((which)) or claims that could have been raised by the contractor relating to the challenged determination or action, but which were not pursued at the conference((;)) and not addressed in the department's administrative review conference determination letter((; and stated in the contractor's request for adjudicative proceeding)). In its request for an adjudicative proceeding or as soon as practicable, the contractor must specify its issues.

(7) If the contractor wishes to have further review of any issue not addressed on its merits, but instead dismissed ((by)) in the department's administrative review conference determination letter, for failure to supply needed, promised, or requested additional information or documentation, or because the department has concluded the request was untimely or otherwise procedurally defective, the issue shall be considered by the presiding officer for the purpose of upholding the department's dismissal, reinstating the issue and remanding for further agency staff action, or reinstating the issue and rendering a decision on the merits.

(8) An adjudicative proceeding shall be conducted in accordance with this chapter, chapter 388-08 WAC and chapter 34.05 RCW. In the event of a conflict between the provisions of this chapter and chapter 388-08 WAC, the provisions of this chapter and chapter 74.46 RCW shall prevail. The presiding officer assigned by the department's ((office)) board of appeals to conduct an adjudicative proceeding and who conducts the proceeding shall render the final agency decision.

(9) At the time an adjudicative proceeding is being scheduled for a future time and date certain, or at any appropriate stage of the prehearing process, the presiding officer shall have authority, upon the motion of either party or the presiding officer's own motion, to compel either party to identify specific issues remaining to be litigated.

(10) If the presiding officer determines there is no material issue(s) of fact to be resolved in a case, the presiding officer shall have authority, upon the motion of either party or the presiding officer's own motion, to decide the issue(s) presented without convening or conducting an in-person evidentiary hearing. In such a case, the decision may be reached on documentation admitted to the record, party admissions, written or oral stipulation(s) of facts, and written or oral argument.

(11) The ((office)) board of appeals shall issue an order dismissing an adjudicative proceeding requested under subsection (5)(((a))) of this section, unless within two hundred seventy calendar days after the ((office)) board of appeals receives the application ((or request)) for an adjudicative proceeding:

(a) All issues have been resolved by a written settlement agreement between the contractor and the department signed by both and filed with the ((office)) board of appeals; or

(b) An adjudicative proceeding has been held for all issues not resolved and the evidentiary record, including all rebuttal evidence and post-hearing or other briefing, is closed.

This time limit may be extended one time thirty additional calendar days for good cause shown upon the motion of either party made prior to the expiration of the initial two hundred seventy day period. It shall be the responsibility of the contractor to request that hearings be scheduled and ensure that settlement agreements are signed and filed with the ((office)) board of appeals in order to comply with the time limit set forth in this subsection.

(((10))) (12) Any party dissatisfied with a decision or an order of dismissal of the ((office)) board of appeals may file a petition for reconsideration within ten calendar days after the decision or order of dismissal is served on such party. The petition shall state the specific grounds upon which relief is sought. The time for seeking reconsideration may be extended by the presiding officer for good cause upon motion of either party. The presiding officer shall rule on a petition for reconsideration and may seek additional argument, briefing, testimony, or other evidence if deemed necessary. Filing a petition for reconsideration shall not be a requisite for seeking judicial review; however, if a petition is filed by either party, the agency decision shall not be deemed final until a ruling is made by the presiding officer.

(((11))) (13) A contractor dissatisfied with a decision or an order of dismissal of the ((office)) board of appeals may file a petition for judicial review pursuant to RCW 34.05.570(3) or other applicable authority.

[Statutory Authority: RCW 74.46.800. 96-15-056, § 388-96-904, filed 7/16/96, effective 8/16/96. Statutory Authority: RCW 74.46.800 and 1995 1st sp.s. c 18. 95-19-037 (Order 3896), § 388-96-904, filed 9/12/95, effective 10/13/95. Statutory Authority: RCW 74.46.800. 94-12-043 (Order 3737), § 388-96-904, filed 5/26/94, effective 6/26/94. Statutory Authority: RCW 74.46.800 and 74.09.120. 91-12-026 (Order 3185), § 388-96-904, filed 5/31/91, effective 7/1/91. Statutory Authority: RCW 34.05.220 (1)(a) and 74.09.120. 90-04-071 (Order 3003), § 388-96-904, filed 2/5/90, effective 3/1/90. Statutory Authority: RCW 74.09.180 and 74.46.800. 89-01-095 (Order 2742), § 388-96-904, filed 12/21/88. Statutory Authority: 1987 c 476. 88-01-126 (Order 2573), § 388-96-904, filed 12/23/87. Statutory Authority: RCW 34.04.020. 84-05-040 (Order 2076), § 388-96-904, filed 2/17/84. Statutory Authority: RCW 74.09.120. 82-21-025 (Order 1892), § 388-96-904, filed 10/13/82; Order 1262, § 388-96-904, filed 12/30/77.]

NEW SECTION

WAC 388-96-905  Case mix accuracy review of MDS nursing facility resident assessments. (1) The department shall perform periodic nursing facility on-site accuracy reviews of minimum data set (MDS) assessments of nursing facility residents, for the purpose of verifying the accuracy of facility case mix data used to establish and update Medicaid payment rates, and for other purposes the department may deem appropriate.

(2) Contractors, their representatives, and authorized nursing facility personnel may ask questions and raise concerns with the quality assurance nurse (QAN) or other designated department representative at the time a case mix accuracy review is conducted. Contractors, their representatives and authorized nursing facility personnel should attempt to resolve any differences and provide additional documentation, information or clarification prior to the case mix accuracy review exit conference.

(3) Upon completing a case mix accuracy review, the QAN shall hold an exit conference to inform the facility of the QAN's observations and preliminary findings. MDS inaccuracies, if any, will be identified and the findings that substantiate these inaccuracies shall be described.

(4) Within five working days after the case mix accuracy review exit conference is held, the nursing facility district manager (DM) for the facility's district shall send the case mix accuracy review decision letter to the nursing facility administrator at the facility address. The case mix accuracy review decision letter shall be sent certified mail, return receipt requested, shall describe in detail the QAN's findings, and shall identify the:

(a) Resident assessments that were reviewed;

(b) RUG-III or other applicable case mix grouping that was determined for the resident assessments reviewed;

(c) Changes in assigned classification, if any, that were made for residents whose assessments were reviewed;

(d) Right of the contractor to appeal any disagreement with the case mix accuracy review decision to the department's case mix accuracy review administrator or his or her delegate:

(i) Where to send an appeal request; and

(ii) The time limit for requesting an appeal.

(5) If the contractor intends to appeal the DM's case mix accuracy review decision letter, the appeal request must be in writing and mailed to the department's case mix accuracy administrator within ten calendar days after receipt of the case mix accuracy review decision letter. The appeal request letter shall:

(a) Be signed by the contractor or by a partner, officer, or authorized employee of the contractor;

(b) State the particular issue(s) raised, including any explanation or basis for disagreeing with the department's findings or actions.

(6) Prior to the informal administrative hearing, the case mix accuracy review administrator shall have no involvement in the case mix accuracy review decision.

(7) Upon receiving a timely appeal request, the administrator shall review any documentation and information submitted with the request, and contact the contractor by telephone to schedule an informal administrative hearing. The purpose of this informal hearing is to give the contractor one opportunity to present information which might warrant modification or deletion of resident-specific accuracy findings resulting from the case mix accuracy review. Issues other than clinical issues of resident need and assessment shall not be considered or addressed. Nonclinical issues beyond the scope of appeal include, but are not limited to:

(a) Any remedies or negative actions imposed by the department to rectify practices or inaccuracies;

(b) Alleged inconsistencies in the accuracy review process;

(c) Challenges to the authority or adequacy of the case mix accuracy review process; and

(d) Payment rate issues or other adverse actions subject to review under WAC 388-96-904.

(8) On or before the informal hearing date, the contractor must submit all necessary supporting documentation or other information to the case mix accuracy review administrator. The administrator may request additional information or documentation from the contractor at any time before issuing the final, informal hearing decision. The contractor shall provide all information or documentation within the time limits established by this section, or by the administrator. In the event that the contractor fails to submit the required documentation for a claim or issue within the specified time limits, the accuracy review administrator shall dismiss the claim or issue with prejudice.

(9) The informal case mix accuracy review administrative hearing shall be conducted in person, unless both the contractor and the department agree that it can be conducted by telephone.

(10) Within ten days after the informal administrative hearing or within ten days after receipt of any additional information or documentation requested, whichever is later, the case mix accuracy review administrator shall send the appeal decision in writing to the nursing facility administrator at the facility address. The appeal decision letter shall be sent regular mail and shall:

(a) Be the final agency decision of the department;

(b) Be based on the independent judgment of the case mix accuracy review administrator who conducted the informal administrative hearing and reviewed all information and documentation; and

(c) Recite the right of the contractor to seek judicial review under the state's Administrative Procedure Act (chapter 34.05 RCW).

(11) A contractor dissatisfied with the final agency decision issued by the case mix accuracy review administrator may file a petition for judicial review pursuant to RCW 34.05.570(3) or other applicable authority.

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REPEALER

The following sections of the Washington Administrative Code are repealed:

WAC 388-96-023 Conditions of participation.

WAC 388-96-029 Change of ownership.

WAC 388-96-032 Termination of contract.

WAC 388-96-101 Reports.

WAC 388-96-104 Due dates for reports.

WAC 388-96-110 Improperly completed or late reports.

WAC 388-96-113 Completing reports and maintaining records.

WAC 388-96-128 Requirements for retention of records by the contractor.

WAC 388-96-131 Requirement for retention of reports by the department.

WAC 388-96-134 Disclosure of nursing home reports.

WAC 388-96-204 Field audits.

WAC 388-96-207 Preparation for audit by the contractor.

WAC 388-96-210 Scope of field audits.

WAC 388-96-213 Inadequate documentation.

WAC 388-96-220 Principles of settlement.

WAC 388-96-221 Preliminary settlement.

WAC 388-96-224 Final settlement.

WAC 388-96-226 Shifting provisions.

WAC 388-96-228 Cost savings.

WAC 388-96-229 Procedures for overpayments and underpayments.

WAC 388-96-501 Allowable costs.

WAC 388-96-503 Substance prevails over form.

WAC 388-96-507 Costs of meeting standards.

WAC 388-96-508 Travel expenses for members of trade association boards of directors.

WAC 388-96-509 Boards of directors fees.

WAC 388-96-513 Limit on costs to related organizations.

WAC 388-96-521 Start-up costs.

WAC 388-96-523 Organization costs.

WAC 388-96-529 Total compensation--Owners, relatives, and certain administrative personnel.

WAC 388-96-531 Owner or relative--Compensation.

WAC 388-96-533 Maximum allowable compensation of certain administrative personnel.

WAC 388-96-543 Expense for construction interest.

WAC 388-96-555 Depreciation expense.

WAC 388-96-557 Depreciable assets.

WAC 388-96-567 Methods of depreciation.

WAC 388-96-569 Retirement of depreciable assets.

WAC 388-96-571 Handling of gains and losses upon retirement of depreciable assets settlement periods prior to 1/1/81 and rate periods prior to 7/1/82.

WAC 388-96-573 Recovery of excess over straight-line depreciation.

WAC 388-96-716 Cost areas or cost centers.

WAC 388-96-717 Desk review adjustments.

WAC 388-96-719 Method of rate determination.

WAC 388-96-722 Nursing services cost area rate.

WAC 388-96-727 Food cost area rate.

WAC 388-96-735 Administrative cost area rate.

WAC 388-96-737 Operational cost area rate.

WAC 388-96-745 Property cost area reimbursement rate.

WAC 388-96-752 Documentation of leased assets.

WAC 388-96-754 A contractor's return on investment.

WAC 388-96-761 Home office, central office, and other off-premises assets.

WAC 388-96-763 Rates for recipients requiring exceptionally heavy care.

WAC 388-96-764 Activities assistants.

WAC 388-96-765 Ancillary care.

WAC 388-96-768 Minimum wage.

WAC 388-96-769 Adjustments required due to errors or omissions.

WAC 388-96-774 Add-ons to the prospective rate--Staffing.

WAC 388-96-778 Public disclosure of rate-setting methodology.

WAC 388-96-801 Billing period.

WAC 388-96-804 Billing procedures.

WAC 388-96-807 Charges to patients.

WAC 388-96-810 Payment.

WAC 388-96-813 Suspension of payment.

WAC 388-96-816 Termination of payments.